
PRESENTED BY 



The Organization of the Lumber 
Industry 

With special reference to the influences 

determining the prices of lumber 

in the United States 



A DISSERTATION 

presented to the 

Faculty of Princeton University 

in Candidacy for the Degree 

of Doctor of Philosophy 



by 
WILSON COMPTON 



PRINCETON: 

PRINCETON UNIVERSITY PRESS 

1916 



.Cm 



Accepted by the Department of History, Politics 
and Economics, June 191 5. 




THE ORGANIZATION OF 
THE LUMBER INDUSTRY 

c 

WITH SPECIAL REFERENCE TO THE 

INFLUENCES DETERMINING 

THE PRICES OF LUMBER IN 

THE UNITED STATES 



BY 
WILSON COMPTON, Ph. D. 

Instructor in Economics, Dartmouth College 



CHICAGO 

AMERICAN LUMBERMAN 

1916 



Copyright, 1916 

by 

American Lumberman 

431 South Dearborn Street, Chicago 

Gill 

m 



Curtis-Johnson Printing Company 
Chicago, Illinois 



PREFACE. 

The solution of many of the economic problems associated with the 
conservation of natural resources is intimately connected with the 
analysis of prices. This conception has led to the presentation of a 
study of the influences w T hich have largely determined the recent course 
and the present level of the prices of lumber in the United States. Of 
the necessary incompleteness of the analysis, the writer is aware. It is 
hoped, however, that the appraisal of the price-determinants may be 
found to have sufficient foundation in fact, to warrant its acceptance by 
those who are interested in the lumber industry, its history and its organi- 
zation in the United States. 

The method of price study employed is a novel one. But the 
character of the source material to which the writer has had access has 
left open no other practicable way. For the peculiar nature of these 
statistics the organization of the lumber industry is largely responsible. 
Had the writer been able to avoid the almost exclusive use of relative 
prices, he would have been spared much of the laborious effort that has 
been devoted to the diagrams, tables and appendices. It is confidently 
hoped, however, that the initial inconvenience due to the method of treat- 
ment may be compensated by the resultant greater completeness and 
accuracy of the evidence. 

Acknowledgment is made of special indebtedness to the Department 
of Commerce of the United States and to the Forest Service and the 
Bureau of Labor Statistics. Their libraries and files have been gen- 
erously placed at the disposal of the writer in the preparation of this 
monograph. Grateful acknowledgment is rendered also to the National 
Lumber Manufacturers' Association; to its affiliated associations and to 
the many individual lumber manufacturers who have assisted with much 
useful information. Special mention is made of the American Lumber- 
man. Because of its long identification, through its predecessors, with 
the lumber industry and because of the representative character of its 
interests throughout the United States, the American Lumberman has 
been a useful source to which the writer has had frequent resort. 

Of his indebtedness to Professors Frank A. Fetter, E. W. Kem- 
merer and W. M. Adriance of Princeton University, the writer wishes to 
record the grateful acknowledgment. Without their constant encour- 
agement and advice this monograph would have lacked much of whatever 
merit the student of the lumber industry may now find in it. 

Wilson Compton. 
Hanover, New Hampshire, January, 1916. • 



in 



THE ORGANIZATION OF THE LUMBER INDUSTRY 



Key: To facilitate the citation of sources reference to the trade 
literature, throughout the present study, has been made as follows: 

Cited as: 

American Lumberman A. L. 

St. Louis Lumberman St. L. L. 

New Orleans Lumber Trade Journal N. O. L. T. J. 

Mississippi Valley Lumberman M. V. L. 

New York Lumber Trade Journal N. Y. L. T. J. 

West Coast Lumberman W. C. L. 

Pacific Coast Lumber Trade Journal P. C. L. T. J. 

Northwestern Lumberman N. L. 

Southern Lumberman S. L. 

Hardwood Record Hardwood Record 

The Timberman The Timberman 



IV 



SYNOPSIS OF CONTENTS 



CHAPTER I. 

Introduction. 

Page 

Relative lumber prices : scope of study 1 

Price influences peculiar to lumber 1 

Characteristics of lumber industry : production 4 

"Cost of production" 4 

Taxation of timber 6 

Characteristics of lumber industry : distribution 7 

Foreign trade in lumber 7 

The tariff on lumber 9 

Transportation of lumber 9 

Encouragement of lumber industry by the railroads .... 10 

Rate increases 10 

Transcontinental rates - 11 

Increases annulled 12 

Willamette Valley to San Francisco rate. 13 

Principles asserted in lumber rate cases 14 

Interstate Commerce Commission 14 

Supreme Court 14 

Transportation costs as a price influence 15 

Influence of changes in rates 16 

Labor conditions in the manufacture of lumber 17 

The lumber trade press 18 

Normal range of actual sales prices 20 

"List" prices 20 

Grades of natural agents used in lumber manufacture 21 

Conditions of timber supply in the United States 21 

CHAPTER II. 
Organization of the Lumber Industry : Production. 

Magnitude of the lumber industry 25 

Timber resources 26 

Extent of the lumber industry 27 

Species of commercial importance 27 

Early manufacture 30 

Geographical distribution of production 31 

Cycles of lumber production : shifts of sources of supply 32 

Evolution of technology of manufacture 36 

The sawmill 36 

Development of the individual mill 38 

Number of mills 38 

Increase in mill capitalization 39 

Average mill capacity 39 

v 



THE ORGANIZATION OF THE LUMBER INDUSTRY 



CHAPTER III. 

Page 
Organization of the Lumber Industry: Distribution. 

Competition between species of lumber 41 

The lumber markets 41 

Relation of wood-using industries to sources of supply 42 

Market for low grades 43 

Development of lumber industry in the South 43 

Extension of market for southern yellow pine 43 

West Coast lumber 44 

Invasion of eastern markets 45 

Hardwoods 45 

Distribution of hardwood product 45 

Distribution of lumber for factory uses 46 

Higher grades 46 

Lower grades 47 

Divisions within the lumber industry 48 

Ownership of standing timber 48 

Logging 48 

Selling agencies 48 

Manufacture of lumber 49 

( "Line-yards" 49 

Wholesale distribution 50 

Associations of wholesalers 50 

Retail distribution 50 

Associations of retailers 51 

Organizations of manufacturers 51 

Early permanent association 52 

Extent of organization 52 

Minor species 53 

Hardwoods 53 

Purposes of association 54 

Southern yellow pine 54 

West Coast lumber 54 

Northern pine 54 

Hemlock 54 

Minor species 55 

The type of manufacturer's association 55 

General purposes 56 

Price policy 56 

Uniformity of lists 56 

The National Lumber Manufacturers' Association 57 

Official purposes 58 

Special activities 58 

Extent of affiliation 59 

vi 



SYNOPSIS OF CONTENTS 



CHAPTER IV. 

Ownership and Prices of Standing Timber. Page 

Public land legislation the cause of present distribution 60 

General laws -. 60 

Special legislation 61 

Character and policy of ownership 61 

Effect upon stumpage prices 62 

"Concentration does not imply higher prices" 62 

Principle of competitive timber price fixation 63 

Subjective valuations cause of with-holding of timber. . . 63 

Classes of timber owners 64 

Attitude toward present use of timber 64 

Continuity of upward tendency of stumpage prices 64 

Current stumpage prices 65 

Demand with intent to current manufacture 65 

Timber with-holding a potential price influence 66 

Historical development of timber ownership 66 

Effect of historical conditions of ownership 66 

Concrete application of principle of competitive price 

fixation 67 

Effect of exhaustion 67 

Recent finding misleading 68 

Concentration a problem for the future 68 

Average prices of leading species 69 

Douglas fir 70 

Southern pine 70 

Northern pine 71 

Other species 72 

Stumpage prices and "cost of production" 72 

Fallacious conception of "cost of production" 72 

Relation of log prices to lumber prices 73 

Log prices and stumpage prices compared 73 

CHAPTER V. 

The Prices of Lumber. 

Prices, 1860 to 1913 76 

General movement of prices 78 

Lumber prices and general commodity prices compared 80 

Relative rise since 1880 80 

Prices of building materials 81 

Price classification by species 81 

Total supply compared to annual cut 83 

Interpretation of price movements 84 

Southern yellow pine 84 

North Carolina pine 86 

Douglas fir 86 

vii 



THE ORGANIZATION OF THE LUMBER INDUSTRY 

The Prices of Lumber. — Continued. 

Page 

Northern pine 86 

Hemlock 86 

Cypress 87 

Effect of financial strength of holding 87 

Relation of supply to price 88 

Actual and quoted prices compared 89 

White or northern pine 91 

Relation of grade to price 93 

Relation of transportation costs to price 93 

Price differential between markets 95 

The normal differential 95 

Influence of competition from other species 98 

Relation of general building activity to lumber prices 98 

Credit conditions in relation to building enterprise 99 

Effect of building activity on prices of dimension lumber. . . . 100 
Reaction of lumber prices to building prosperity before 1907 . 100 

Lumber price phenomena since 1907 102 

Prices of lumber and of other building materials 103 

General influences affecting lumber prices 103 

Increase in world prices of lumber 104 

CHAPTER VI. 

The Influences Which Have Affected the Prices of Lumber: 
Educative Agencies and Exhaustion. 

Methods of accounting and statistical practice 107 

Dynamic influences on lumber prices 108 

Lumber prices and general prices compared 109 

Influence of industrial depression 110 

Analogy to lumber prices, 1860 to 1873 Ill 

Educative agencies in the lumber industry 112 

Early interest in technology of production 112 

Stability and efficiency of organization and method 113 

Exhaustion of timber supply 113 

Character and range of influence 114 

Extension of transportation facilities 115 

Classification of influences due to exhaustion 116 

Cumulative evidence of exhaustion in leading states 116 

Exhaustion of important species 117 

Relation of lumber prices to exhaustion 119 

Universality of influence of exhaustion upon prices 119 

Hemlock an apparent exception 120 

Cheap and high priced species compared 121 

Continuity of phenomena of exhaustion 122 

Coincident lumber price phenomena in Canada 122 

Similarity of conditions of manufacture 122 

viii 



SYNOPSIS OF CONTENTS 



Page 

Significance of Canadian lumber price movements 123 

Prices in the United States and Canada compared 123 

Analogy to Canadian export prices 124 

Analogy to Prussian prices 125 



CHAPTER VII. 

The Influences Which Have Affected the Prices of Lumber: 
Substitution and Association Activities. 

Substitution of competing materials 126 

Definition of substitution 126 

Substitute building materials 126 

Influence of substitution upon prices 127 

Diversion of demand since 1907 127 

Organized artificial restraints upon competition 129 

Natural influences adequate explanation of prices 129 

General restraint upon competition impracticable 130 

Erroneous interpretation of price phenomena 131 

West Coast lumber 131 

Fallacious assumption respecting prices 132 

Association price activities not a substantial influence 132 

Arbitrary increases unsuccessful: Poplar 134 

The Michigan Maple Co 136 

List prices of actual prices compared 136 

Southern yellow pine 136 

Northern pine and Douglas fir 137 

The Boston Agreement 141 

The Missouri Ouster Suit 141 

Static influence of joint action 141 



APPENDICES. 

I. Sources of items constituting the general index of lumber prices . 144 
II. Relative general lumber prices in the United States : 1860 to 

1913 149 

III. Relative monthly average prices of lumber of important species : 

1896 to 1910 t 150 

IV. Relative prices of lumber and of "all commodities" in the United 

States and in Canada; prices of substitute building materials. 151 
V. Letter : Conditions of lumber manufacture in the United States. 152 



IX 



DIAGRAMS. 

PAGE 

1. Comparison of lumber prices with general prices 3 

2. Imports and exports of lumber 8 

3. The range of lumber prices 19 

4. The available resources in standing timber 22 

5. Proportionate production of lumber 28 

6. Actual production of lumber 29 

7. Successive sources of lumber supply 33 

8. Shift in sources of supply of lumber 35 

9. Prices of fir logs and fir lumber 75 

10. Relative general lumber prices 77 

11. Relative prices, 1860 to 1913 79 

12. Relative prices, 1873 to 1897; 1897 to 1913 82 

13. Relative prices of eight species 85 

14. Relation of prices to changes in supply 90 

15. Prices and supply of Southern yellow pine 92 

16. Different grades of Northern pine 94 

17. Price differential between markets 96 

18. Building activity and prices of lumber 101 

19. Relative prices of substitutes for lumber 105 

20. Distribution by species of annual lumber product 118 

21. Consumption of substitutes for lumber 128 

22. List prices and actual sale prices ; Southern pine 138 

23. List prices and actual sale prices; Northern pine; fir 140 



TABLES. 

1. Production of lumber in the United States 25 

2. Timber supply of the United States 26 

3. Number and capitalization of mills, 1850 to 1909 38 

4. Average mill capacity, by groups 39 

5. The prices of standing timber 69 

6. Periodical fluctuations in lumber prices 83 

7. Relation of production to timber supply 83 

8. Lumber prices in Europe and Japan 103 

9. Distribution of lumber cut by states 117 

10. Canadian lumber export prices 124 

1 1 . Relative monthly prices of important species 1 50 

12. Lumber prices in the United States and Canada 151 



CHAPTER I. 

INTRODUCTION. 

The present study is concerned with the special influences which 
have determined the prices of lumber in the United States. Only whole- 
sale prices have been used. These have been defined as the prices at 
which sales are actually made on the usual terms to the retailer or to 
the purchaser of lumber in large quantities. They represent that stage 
in distribution, nearest to the prices paid by the ultimate consumer, at 
which, as between sources of production and as between markets, there 
has been substantial uniformity in grading and in nomenclature. 1 Terms 
of sale and grading practice, indeed, have often varied greatly among 
retailers in the same market. Loosely defined rules for grading and for 
inspection had been recognized by many manufacturers of lumber before 
1890. Not however until the organization, throughout the country, of 
manufacturers' associations has approximate uniformity been established. 
The resultant minute classifications have since then aggregated hundreds 
of different items. 2 

Relative Lumber Prices: Scope of Study. 
The substantial elimination of confusion in grading has not, however, 
made it practicable to project back the identification of similar grades 

1 Lack of uniformity in grading was until recent years a conspicuous defect 
in all branches of the lumber industry. The recent efforts of associations of manu- 
facturers to promote the "standardization of product" have met with reasonable 
success among the producers of softwood lumber. Hardwood grading is still 
divergent. Grades may be identified in general as follows : 

Grade: 1st clear; width 6 in.; defects allowed, none. 

Grade : 2nd clear ; width, 6 in. ; defects allowed, bright sap, small knots. 

Grade: 3rd clear; width 4 in.; defects allowed, same; larger knots. 

Grade: Selects, width, 4 in.; defects allowed, 60 per cent clear of knots, rot 
or shake. 

Grade : Shop — large or loose knots ; 2 ft. to 6 ft. clear lumber between knots. 

Grade: Wide common (No. 1), 12 in.; defects allowed, blue sap, large knots, 
tight shake, wane; no rot. 

Grade : No. 2 common, 4 in. ; defects allowed, same. 

Grade : No. 3 common ; defects allowed, very coarse knots, wane, discoloration. 

Grade : Culls ; defects allowed, red rot, loose shake, knots, check, wane. 

Dimension lumber : No. 1 sound, square-edged, tight round knots ; No. 2 
sound, wane, long coarse knots, worm holes ; culls, wane, shake, rot, imperfect 
manufacture; mill run, the average grade of the current product, varies from mill 
to mill and from year to year. Thickness is usually not specified in the grading 
rules; N. O. L. T. J., Feb. 15, 1899, p. 13; A. L., Sept. 3, 1904, p. 26. 

Classification of dressed lumber: SIS or D1S, surfaced, dressed or planed on 
one side; S2S, same, on two sides; S1S1E, surfaced on one side and one edge; 
D & M, dressed and matched; D & H, dressed and headed. Lumber is usually 
sawed in even widths and lengths and classified from clear to common. The above 
general rules have been abstracted from the standard rules of the various lumber 
manufacturers' associations (See infra., pp. 51-57) ; from the New York Lumber 
Trade Journal and from the publications of the Lumbermen's Bureau (Inc.), 
Washington, D. C. 

2 E. g., Standard List B, issued by Pacific Lumber Trade Journal, Seattle, 1913, 
pp. 3-21, shows nearly 400 items. 



2 THE ORGANIZATION OF THE LUMBER INDUSTRY 

and items into the period before about 1890. An accurate analysis of 
actual prices would have required the establishment of such identity. In 
this study, therefore, almost exclusive use has been made of relative 
prices and of index numbers on a selected base. A number of successive 
series of prices, each overlapping for not less than three years, the im- 
mediately succeeding series, have been reduced to a single series on a 
common base price. For example, the series of lumber prices (See Ap- 
pendix II., III.) for the period 1886 to 1897 overlaps, for the three years, 
1896 to 1898, the succeeding series for the period 1897 to 1910. Inac- 
curacies due to changes in grading have been thus reduced to a minimum. 

It is the purpose of this study to explain the changes in the prices 
of lumber shown by the following diagram. 3 To explain the direction 
and the extent of the variations in lumber prices from the prices of "all 
commodities'' (the gold dollar being the standard unit of price), is the 
task of the following chapters. The year 1880, selected as the base year 
in Diagram 1 may be fairly taken as marking the first appearance of 
indications of substantial exhaustion of the white pine supply in Michi- 
gan. 4 During the year 1880 nearly one-fourth (23.4 per cent) of the 
total lumber output of the United States was produced in the State of 
Michigan alone. There has since been an almost unbroken relative rise in 
lumber prices as compared with general prices, the only notable exception 
having occurred after the panic of 1907. The base line denotes "all 
commodities" which, for each successive year, is taken as 100. The 
index numbers below the base line show the course of the prices of "all 
commodities" with the prices for 1880 taken as the base, 100. Assuming 
therefore that general prices, i. e., the prices of "all commodities," have 
remained constant at 100 (the base line), the curve in Diagram 1 shows 
the movement of lumber prices in so far as it has differed from the move- 
ment of general prices. 

Price Influences Peculiar to Lumber. 
The quantitative isolation of effects due to a specific cause from the 
total effect due to a multiplicity of co-operating causes has been imprac- 
ticable. The necessary data are at present not available. The tendency 
to higher prices caused by the recent relative increase in the quantity of 
money is assumed to have been a general influence tending to affect in 
the same direction, the prices of all commodities. 5 Unless, therefore, the 
changes in the purchasing power of money have had more than an average 
actual effect 6 upon lumber prices — and there has been no evidence that 
this is the case — they do not constitute, in any real sense, an influence. 
peculiar in its effect upon lumber prices. In order to isolate causes pe- 
culiarly operative in the lumber industry, it has been necessary to deter- 
mine the extent to which general causes have been responsible for his- 
torical lumber price phenomena. It is the purpose of this chapter to 

3 The index of prices of "all commodities" has been adapted from Bureau of 
Labor Statistics, Bull. 149, Wholesale Prices, 1913, p. 179; that of lumber prices 
from Appendix II. See also Diagram 12, p. 82. 

4 Annual Review of the Manufacture of Lumber and Salt in the Saginaw 
District, E. Cowles, ed., 1881, p. 3. 

5 Kemmerer, E. W., Money and Credit Instruments in their Relation to General 
Prices, 2d ed., 1909, pp. 141, 142. 

6 Cairnes, J. E., Essays, pp. 64, 65. 



INTRODUCTION 




DIAGRAM 1. 
Comparison of Lumber Prices with General Prices, 1.880 to 1913. 



Note : The secular trend is the course of general prices over 
period of years. 



4 THE ORGANIZATION OF THE LUMBER INDUSTRY 

define the scope of the present study; to distinguish those influences 
which have been important from those which have not; and to esti- 
mate briefly the effect of selected minor influences in the chronology of 
lumber prices in the United States. 

Characteristics of Lumber Industry: Production. 

One of the distinctive characteristics of lumber manufacture is the 
nature of its relation to the supply of raw material, i. e., logs. The 
amount of standing timber, unlike other "natural resources" (which are 
also capable of exhaustion), is definitely ascertainable. 7 It is a known 
quantity incapable of increase except by a growth which is itself measur- 
able. 8 The bulk of it in the United States has become relatively inacces- 
sible to the centers of population. This has been a result of the depletion 
of original forests in the older, more densely populated regions. The 
great size and weight of lumber in proportion to its value has, for econ- 
omy in transportation, caused the concentration of lumber manufacture 
in the forests themselves. 

Sawmills therefore use as raw material a natural product the total 
supply of which is known, inconvenient of transportation and originating 
in sources nearby. Mills have been located with reference to cheap log 
supply rather than to convenience in marketing their product. 9 The 
steadily increasing relative exhaustion of the raw material of lumber 
manufacture is attested by the fact that one-half of the original stand 
of merchantable virgin timber in continental United States has been 
consumed (1909), and that the present rate of total annual growth is 
about one-third of that of the annual cut. 10 

"Cost of Production." 

The "cost of production" of logs, as calculated by lumber manu- 
facturers, has been merely a harvesting cost, i. e., the expense of logging 
and of delivery from the stump to the mill. Generally speaking, there 
has been no industry in the United States devoted to the growing of 
timber of merchantable quality. 11 The total available physical supply of 
timber during any period has therefore been relatively constant. It can- 
not be increased in response to current increases in demand nor can it 
be diminished in the face of a decline in the demand. The effective 
supply on the other hand, i. e., that part which is at any time actually 
offered for sale, is capable of sensitive adjustment to current demand. 

7 See infra., p. 60, for estimate of standing timber. 

8 Maw, P. T., The Practice of Forestry ; concerning also the Financial Aspect 
of Afforestation, 1909, pp. 272, 273; also Schlich, Sir Wm, Manual of Forestry, 
Vol. Ill, Forest Management, 1911, pp. 68, 91. 

9 Washington's Secondary Wood-Using Industries, p. 1 ; in P. L. T. J., Nov., 
1911; Wood-Using Industries of New York, 1913, pp. 7, 8. 

10 The Timber Supply of the United States, For. Ser. Circ. 166, 1909, p. 6. 

11 There have been many attempts, on a small scale, to encourage timber grow- 
ing. State and federal activity has been the most successful. Lumber manu- 
facture, however, has been concerned almost exclusively with virgin timber or with 
strictly natural regrowth. Wood-Using Industries of Ohio, 1912, pp. 12, 13; 
Kellogg, R. S., and Ziegler, E. A., The Cost of Growing Timber, 1911, p. 4. 



INTRODUCTION 



When timber was plentiful throughout the country, the demand for it was 
slack. Tree growth was often considered to be an encumbrance to the 
soil which alone was thought to have potential value. 12 Willing sellers 
of timber were many ; willing buyers few. As convenient supplies, how- 
ever, became scarcer, timberlands as such began to acquire value for 
investment. 

Beginning with the decline of the lumber industry in the Eastern 
States 13 standing timber, first in the Lake States region, later in the 
southern pine states and since the early nineties in the Pacific North- 
west, 14 has been concentrated in private holding to a degree which offers 
a serious potential challenge to future public policy. 15 The expropriation 
from the public domain in these three regions of more than three-fourths 
of the remaining stumpage, 16 has caused a great change in the conditions 
of supply of raw material to the lumber manufacturer who does not own 
his own timber. Physically accessible supply and effective supply of tim- 
ber are now by no means co-extensive. 

Since stumpage has acquired an appreciable value in all forested 
regions, it is frequently held for higher prices. Encouraged by the almost 
uninterrupted rise in stumpage prices following the extension of com- 
merce in lumber beyond the limits of local trade, timber owners have come 
to believe that prices tend always to rise; never to fall. 17 When, there- 
fore, the current demand has declined, timber has been withdrawn from 
sale, the owner preferring to await an anticipated improvement 18 in the 
market rather than to sell at a lower price. Thus stumpage price levels once 
reached, have tended on the average to be maintained by financially strong 
holders, i. e., holders who have been able to pay all carrying charges with- 
out resort to the immediate current sale of timber. The stronger there- 
fore the average financial strength of timber ownership, the less respon- 

12 Wood-Using Industries of Ohio, p. 9. 

13 See infra., pp. 28, 29, Diagrams 5 and 6. 

14 In these three regions stand over 80 per cent of the remaining supply of 
stumpage. 

15 The Lumber Industry, Pt. II., Concentration of Timber Ownership in 
Important Selected Regions, 1914, p. xix. 

16 The United States owns about 550 billion feet in the National Forests or 
about one-fourth. The privately owned timber is, however, of a higher average 
quality. The Status of Forestry in the United States, For. Ser. Circ. 167, 1909, 
pp. 3, 5. 

" A. L, Nov. 12, 1910, p. 79; The Lumber Industry, Pt. I, p. 39. 

18 Kellogg, R. S., and Ziegler, E. A., op. cit., pp. 4, 5. The fact is important to 
note, that the majority of timber owners are also manufacturers of lumber. 
Moreover, most of the current lumber output has been produced by manufacturers 
owning their own timber. Although disguised under the dual function discharged 
by the same person, the principle stated has been nevertheless operative. Many 
producers, however, because of inaccurate or incomplete accounting, have been 
unable to determine the cost to themselves as manufacturers of the timber they 
have cut. St. L. L., Nov. 1, 1914, p. 59; also Business and Lumber Trade Condi- 
tions (Barnes, W. E., ed.), No. 33, Nov. 18, 1914, pp. 1-3. 

Many producers also whose enterprises have been heavily bonded, have been 
compelled to manufacture lumber for current sale at whatever prices then pre- 
vailed, in order to meet accruing obligations. The result of such a condition is 
illustrated in the practice among many southern operators of heavy shipping "on 
consignment" to northern markets after the great decline in prices during 1907 and 
1908. This overstocking of the market contributed to a still greater decline in 
lumber prices. 



6 THE ORGANIZATION OF THE LUMBER INDUSTRY 

sive have been stumpage prices to any immediate decline in the prices of 
lumber. Although the physical supply during any period has been ap- 
proximately constant, an adjustment of supply to demand under condi- 
tions of a lower price for lumber, has been secured by a decrease in the 
effective supply, i. e., in the quantity of timber offered for sale. 

Taxation of Timber. 
One of the most potent limitations to the with-holding of timber 
from sale is the influence of the taxation of such property. An insistent 
public problem is here involved in the inequality of administration and in 
the inadequacy of the general property tax as applied to property in tim- 
ber. 19 A study of forest taxation in forty states 20 in 1914 has shown that 
"classification" for a tax on yield is favored in many states where timber 
is an important item of the taxable property ; that by others it is favored 
in theory but feared in practice, as too greatly curtailing current receipts 
from taxation. In nearly all states classification of property is at present 
forbidden by the respective state constitutions. The evidence collected 
and the opinions secured on this subject have shown: 200 

First, that lumber prices have been affected by timber taxation, if 
at all, only through its effect upon the holding, and conversely upon the 
cutting, of timber. 

Second, that taxation has tended to encourage the rapid cutting of 
timber, 

(a) where assessment rates are high and where the law is strictly 
administered; or 

(b) where the annual increase in the value of the timber has not 
been in considerable excess of the annual taxes levied upon it. 21 

Third, that taxation in many states has not prevented the with- 
holding of timber from present use in favor of an anticipated rise in 
value, 

(a) where timber is assessed at a low rate or the administration of 
the tax is loose; or 



19 "Economists have for years recognized the fact that the burden to which 
such [timber] lands are subject under present tax systems is very unjust." The 
Status of Forestry in the United States, For. Ser. Circ. 167, p. 18. 

20 A questionnaire concerning the taxation of timber was submitted by the 
present writer to the tax commission of each state. The majority of the forty 
responses included replies to the inquiries concerning the effect: (1) upon the 
holding of timber ; and (2) upon lumber prices in the respective states, of the taxa- 
tion of timber. The responses indicate some familiarity with the propaganda fos- 
tered by the International Tax Association in 1907 and 1908 at its conferences at 
Columbus, Ohio, and at Toronto, Canada, respectively. 

20 « See Compton, Wilson, Recent Tendencies in the Reform of Forest 
Taxation ; in the Journal of Political Economy, Vol. XXIII, No. 10, Dec, 1915, pp. 
971 to 979. 

21 Some of the replies did not explain the requirement of the "considerable 
excess." It is presumed to cover the annual accumulations of interest upon the 
investment or rather, perhaps, upon the estimated capital value of the stand. It 
is apparent that when the proportionate annual increase in the value of the timber 
no longer exceeds the annual accumulations of carrying charges, of whatever kind 
they may be, the net advantage to the timber owner will be in immediate cutting 
rather than in holding for still greater future stumpage prices. The approach 
to this condition in many states presents a public problem of importance. 



INTRODUCTION 



(b) where the current increase in stumpage value has greatly 
exceeded the tax. This phenomenon has appeared most con- 
spicuously in the Pacific Northwest where have occurred recently the 
greatest proportionate increases in stumpage prices and where also there 
has been the greatest tendency toward speculative timber holding. 22 Tim- 
berlands there, as in many regions of the South, have constituted a large 
proportion of the wealth of the states. 



Characteristics of the Lumber Industry: Distribution. 

Foreign Trade in Lumber. 

About ninety-seven per cent of the domestic production of lumber 
has been consumed within the United States. 23 The exports have con- 
sisted chiefly of high grade lumber of selected species which have acquired 
a market in all parts of the world. 24 For the period 1880 to 1909 imports 
and exports approximately counterbalanced each other. Since 1909 
there has been a rapid increase in exportation while the importation of 
lumber has remained practically constant, as is shown in Diagram 2. Of 
the total quantity of lumber now consumed in the United States about 
two per cent is imported. 25 

Lumber prices in the United States have been influenced by the 
importation of lumber only in so far as such importation has affected 
the supply. Imported lumber has not, however, supplied a demand 
which otherwise would have remained unsatisfied. 26 There is no indica- 
tion that the amount of lumber consumed has risen or fallen with corre- 
sponding fluctuations in the imports. The only markets appreciably 
affected by importation have been those to which Canadian lumber 27 has 
had convenient access, i. e., those of the Northwestern States and of the 
Pacific Northwest. In the aggregate, however, foreign lumber has exer- 
cised only an inconsiderable influence upon conditions of lumber supply 
in the United States. As an independent influence, therefore, it has been 
unimportant. 



22 E. g., the Weyerhaeuser Timber Company is the second largest timber owner 
in the United States. It saws no lumber in its own name. A subsidiary, however, 
the Weyerhaeuser Lumber Company, operates a large mill. The Lumber Industry, 
Pt. II, pp. 4, 9. 

23 Percentage : Exports, of total production, 1880, 1.5; 1890, 2.6; 1899, 2.9; 
1909, 3. Since 1909 exports have almost doubled; average since 1880, 2.6 per cent. 

24 See American Lumber in Foreign Markets, Special Consular Reports, Vol. 
XI, 1894, pp. 5-217. 

26 Percentage : Imports, of total domestic consumption, 1880, 3 ; 1890, 5 ; 1899, 
1.7; 1909, 1.9. Imports have remained practically constant since 1900; average since 
1880, 2.9 per cent. 

26 It is to be remembered that the quantity of lumber imported is not a 
measure of the relative influence of importation upon prices. If importation should 
cease entirely domestic production might be increased or a part of the lumber 
normally exported might be absorbed by the home market. 

27 Practically all importations of lumber have been from Canada. Exports and 
Imports of Forest Products, 1907, For. Ser. Circ. 153, p. 24. Lumber imported from 
other sources than British North America have consisted almost wholly of high 
priced cabinet and finishing woods. Imports of Farm and Forest Products, Dept. 
of Agric. Bur. of Statistics, Bull. 95, 1912, p. 78. 



THE ORGANIZATION OF THE LUMBER INDUSTRY 



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DIAGRAM 2. 
Imports and Exports of Lumber, 1873 to 1913. 



INTRODUCTION 



The Tariff on Lumber. 

Since the lumber industry lias been almost exclusively a domestic 
industry, changes in the tariff schedule on lumber have not been the 
cause of any considerable corresponding changes in lumber prices. Low 
rates have not been uniformly followed by an increase in importation, 
nor higher rates by a decrease (See Diagram 2). The importance to 
the lumber industry of a protective tariff has been often overestimated. 28 
Individual border mills and markets have been undoubtedly affected ad- 
versely by a reduction in the lumber tariff. The effect, however, upon 
the industry of the admission, since 1913, of "free lumber" is generally 
considered, even by manufacturers who meet Canadian competition, to 
have been negligible. 20 Among the lumbermen themselves there has been 
no unanimity of opinion as to the influence of the lumber tariff. The 
prevalent sentiment seems to have been that so little protection has been 
afforded under it that its retention or its removal is of little conse- 
quence. 20 " West Coast lumber manufacturers have long competed suc- 
cessfully in foreign markets with Canadian mills. They have even under- 
sold the Canadian producer in many Canadian markets to which they have 
had convenient access. 30 



Transportation of Lumber. 

The farther the sources of lumber production have receded from 
the centers of consumption, the greater has been the proportion of the 
delivered price which is absorbed by transportation costs. Such costs 
were relatively unimportant as long as lumber travelled only short dis- 
tances to market or where cheap water transportation was accessible. 
Today, lumber constitutes the largest single item of railway tonnage 81 in 
the Pacific Northwest, while in the South it is exceeded only by coal. 

"The shifting of the source of the lumber supply has pre- 
vented the lumber [freight] rate structure from ever attaining 
a condition even approaching stable equilibrium." 32 

During the period in which the Lake States were the chief source 
of supply, 33 transportation to market was mainly by water, especially 

28 An examination of all the tariff hearings by Congress since 1884 shows that 
then as now there has been, among the lumbermen themselves, no unanimity of 
opinion as to the influence of the lumber tariff. In a recent interview (March, 1914) 
a former Michigan white pine manufacturer expressed the opinion that the only 
states affected at all have been the border states and that nowhere have relatively 
high rates been the cause of prosperity nor low rates (or free admission) of 
disaster to any large number of mills. 

29 Special Report on Present and Past Conditions in the Lumber and Shingle 
Industry in the State of Washington, 1914, Bur. of Corp., 1914, pp. 8, 41. 

20 « Official Report, Tenth Annual Convention, National Lumber Manufactur- 
ers' Association, 1912, pp. 40, 41. 

30 Ibid., pp. 7, 41, 42. 

31 Johnson, E. R., and Huebner, G. G., Railroad Traffic and Rates, 1911, Vol. I, 
p. 40. 

32 McPherson, L. H., Railroad Freight Rates, 1909, p. 133. Lumber rates are 
"commodity" or "ex-class" rates and are quoted on the 100 pounds. A thousand 
feet of dry lumber weighs between 2 and 3 thousand pounds, according to species. 

88 See infra., Diagram 5, p. 28. 



10 THE ORGANIZATION OF THE LUMBER INDUSTRY 

by the Great Lakes and by the Mississippi River. 34 The subsequent shift 
to the South and finally to the Pacific Northwest has involved almost com- 
plete dependence upon the railroads for the transportation of lumber to 
the interior markets. Cargo shipments are still maintained to eastern 
ports from South Atlantic and Gulf States mills which have cheap access 
to tidewater. Coastwise trade by many of the West Coast mills is still 
of considerable proportion, although the total quantity so consigned to 
domestic ports is relatively unimportant. 

Encouragement of lumber industry by the railroads. The lumber 
carrying railroads of the interior northern region continued to foster 
the declining white pine industry of the Lake States. They made rela- 
tively lower rates to competitive markets on white pine lumber than on 
southern pine. They encouraged the development of agriculture on lands 
denuded of forests and justified their discrimination against the southern 
pine manufacturer on the grounds that there was no southbound traffic 
for the cars that brought the yellow pine to northern markets. With the 
depletion of the northern forests, however, the rates on southern pine 
have been reduced. 

While the northern railroads were thus discriminating in favor of 
the white pine mills, the railroads newly constructed in the South and in 
the Southwest were attempting to stimulate commerce in southern lumber. 
By successive reductions in the rates applying on northern shipments the 
railroads secured for yellow pine a standing in the northern, central and 
middle-western markets. As the production of white pine further de- 
clined, the control of supply to interior consuming territory, by the 
southern mills, became almost complete. The shift, therefore, from one 
source of supply to another has been either artificially stimulated or re- 
tarded by the action of the railroads. 

Rate increases. One of the most vigorously contested issues between 
the railroads and the public has been whether the carriers shall share in the 
business profits of their patrons. On this question the opinion of the 
Interstate Commerce Commission has been divided. For example, the 
southern railroads, having long fostered the lumber industry in the 
South, frequently attempted to raise their rates on shipments to northern 
markets. They claimed the right to share in the prosperity which they 
themselves had helped to create. The lumbermen contested the advances 
and were upheld by the Interstate Commerce Commission and by the 
courts, on appeal. The advances were nullified on the ground of unrea- 
sonableness per se; that the former rates were sufficiently remunerative 

34 During the period of cargo shipments of white pine the general custom was 
to load indiscriminately, various sizes and grades. The assortment of items and 
grades was made at the different distributing markets. Only three merchantable 
grades were distinguished at the mills, i. e., shipping culls, common and uppers. 
At present the practice is almost universal among mills manufacturing softwood 
lumber, to load at the mill the exact sizes, shapes and grades specified in the 
orders, on cars that go to the purchaser direct, without intermediate handling. 
The primary methods of distributing lumber; in Ann. Rev. of the Manufacture of 
Lumber and Salt in the Saginaw Dist., 1882, p. 8; also McPherson, L. H., op. 
cit, pp. 134, 135. 



INTRODUCTION 11 



to the carriers and that the attempted advance constituted an unjust 
discrimination against the lumber industry. 35 

Transcontinental rates. This issue is again illustrated in the history 
of the transcontinental lumber rates. Until 1894 the West Coast lumber 
industry had been but little developed. It had depended upon water 
transportation for the extension of commerce beyond local markets. The 
establishment in 1894 by the Hill roads of a 40-cent rate on lumber to 
Minneapolis 36 and of a 50-cent rate to Chicago is an excellent example of 
a deliberate attempt to encourage traffic which was at the same time of 
low grade, of long distance and competitive. There had been much med- 
ium and low grade West Coast lumber unable to bear the former trans- 
portation costs. What of this was not consumed locally or in markets 
accessible by water was, therefore, a practical waste. Since there was 
then a normal eastbound movement of "empties" the new rates were fixed 
by the carriers to a little more than cover the additional cost incurred 
in the hauling of loaded cars in place of "empties," i. e., according to 
the "value of the service." 37 An enormous lumber traffic has been built 
up. A new check, actual or potential, has been thereby imposed upon 
the prices to which competing lumber in the same markets, from other 
sources, may rise. Lumber has since become the largest single item of 
transcontinental traffic. 

The price of West Coast lumber increased rapidly after the exten- 
sion of its market. Its chief species, Douglas fir, by 1907 had risen 
in average price more than 100 per cent. 38 Meanwhile the transconti- 
nental traffic in lumber had so increased under the influence of lower 
rates that the direction of the empty car movement was reversed from 
eastward to westward. Thus the "cost of service" to the railroads had 
increased. The value of the service to the shipper had also increased 
somewhat inasmuch as the higher average prices had enabled the West 
Coast lumber to bear a higher rate. As in the South so in the West 
the carriers considered themselves justified in raising the rates on lum- 
ber in order that they might share in the prosperity of an industry 
they had fostered. An average increase of 10 cents per 100 pounds was 
therefore announced in November, 1907, coincident with the advent of 
a general industrial depression. 

The price of fir logs, which had increased from $2.50 in 1895 to 
$13.50 in 1906 (when an excessive and abnormal demand for fir lumber 
had followed the San Francisco earthquake), 39 declined 30 per cent. 
Three synchronous causes contributed to this decline. The effect due 
solely to the increase of rates is therefore difficult to isolate. Industrial 
depression, higher freight rates and a prolonged car shortage operated 



35 H. H. Tift et al. v. Southern Railway et al. 10 I. C. C. Rep. 548, 582; 
138 Fed. Rep. 753; also Central Yellow Pine Association v. Illinois Central 
Railway, 10 I. C. C. 489, 505, 536; 206 U. S. 428; decided May, 1907; also I. C. 
R. Co. v. I. C. C, 209 U. S. 441. 

36 This rate was blanketed for several hundred miles west of Minneapolis. 

37 Dunn, S. O., The American Transportation Question, 1912, pp. 30, 31. 

38 See infra., Diagram 13, p. 85. 

39 Within eight months after the earthquake the average price of fir 
building lumber had increased nine dollars per M feet. W. C. L., Jan. 1, 1907, 
p. 264. 



12 THE ORGANIZATION OF THE LUMBER INDUSTRY 

coincidently to depress prices. The shortage of cars had prevailed since 

1906 and was doubtless the least important of the three causes. 40 The 
relative fall of fir prices (as representative of West Coast lumber) during 

1907 and 1908 was greater than the average decline 41 of general lumber 
prices throughout the United States. The industrial depression, how- 
ever, did not affect the western and mid-western lumber market as 
acutely as it did the market in the Eastern and Central States. 42 A part 
of the drop in fir prices must therefore be attributed to other causes. 
It is probable that the rate increases, together with the uncertainty 
among shippers and buyers as to the fate of the increases then before 
the Interstate Commerce Commission for approval, were the principal 
contributory causes. 43 

Increases annulled. The new rates were contested by the lumber- 
men before the Interstate Commerce Commission. The problem in- 
volved concerned the obligation of the railroad, having once by low 
rates induced investment in the lumber industry, to continue the rates 
upon which the industry had been developed. 44 The manufacturers 
claimed that the increase in profits belonged solely to the industry. The 
railroads defended the increase on three grounds: 45 

First, the increase in the price of lumber. 

Second, the increase in the cost of railway operation. 



40 For several months ending in April 1907 there had been a virtual embargo 
on transcontinental lumber shipments by the Northern Pacific and the Great 
Northern Railroads. 

41 See infra., Diagram 13, p. 85. 

42 A. L., Sept. 26, 1908, p. 39. 

A reasonable index of the comparative effects of the depression may be derived 
from the statistics of wooden buildings erected during 1906, 1907 and 1908. In 
the region west of the Mississippi River supplied wholly or in part by West Coast 
lumber, such building decreased 7 per cent in 1907 as compared with 1906; it 
increased in 1908, 12.5 per cent as compared with 1907. In the central and eastern 
region however the construction of wooden buildings decreased 25 per cent in 1907 
as compared to 1906 and decreased 24 per cent in 1908 as compared to 1907. 

These data are from the annual reports on building published by the United 
States Geological Survey, in Statistics of the Clay-Working Industries in the 
United States for 1906 to 1908. 

43 "Shortly after it was generally known that the rates were to be advanced, 
orders began to cease. * * * This applied not only to buyers of lumber for 
retail yards but to the railroad concerns, who, in some instances, withheld their 
orders until they could determine what was going to occur, and in other instances 
stated that they would not buy until after the advance went into effect and then 
they expected to be able to buy lumber at the mills much cheaper." Testimony, I. 
C. C, Record of Cases 1327, 1329, 1428; p. 1038. 

Thus if the increases were upheld buying among the trade would decline. If 
they were denied the railroads who were the greatest customers of the West Coast 
mills would curtail their orders. The Forest Service has determined average mill 
prices of fir lumber: 1906, $14.20; 1907, $14.12; 1908, $11.97. It must be apparent 
that the decline can be only partially attributable to the influence of the panic of 
1907. Of the contributory causes, the rate increase and the uncertainty incident 
to it were probably the most important. 

44 Ripley, W. Z., Railroads, Rates and Regulation, 1912, pp. 150, 489. 

45 In Circuit Court of the United States for the District of Minnesota, Third 
Division, Complaints in Equity Nos. 883, 884, 885, p. 9. [Case 883 was I. C. C. Case 
1327; 884 was I. C. C. Cases 1329 and 1335; 885 was I. C. C. Case 1428.] 



INTRODUCTION 13 



Third, the west-bound empty car movement. The Commission prac- 
tically restored the old rates. The decision was in part: 

"No adjustment of rates made in the interest of carriers or 
of wholesalers should be permitted if it antagonizes unduly the 
public welfare. Considering the question before us as an economic 
problem — two things should be secured: First, these commodities 
should be brought to the consumer at the least possible expense; 
second, in both transportation and distribution unfettered competi- 
tion should be maintained, thereby securing to the consumer the 
benefits to which he is entitled." 46 

The railroads appealed to the United States Circuit Court, which 
upheld practically all the increases. 47 Final judgment was rendered in 
January, 1912, by the Supreme Court, confirming the action of the Inter- 
state Commerce Commission in the following decision: 48 

"Considering the case as a whole, we cannot say that the order 
[of the Commission] was made because of the effect of the advance 
on the lumber industry, nor because of a mistake of law as to pre- 
sumption arising from the long continuance of the low rate, when 
the carrier was earning dividends, nor that there was no evidence 
to support the finding. If so, the Commission acted within its 
power, and * * * its lawful orders cannot be enjoined." 

The implication here is that the Court does not consider the fact of 
injury to the lumber industry, caused by a decline in mill prices and b> 
a partial loss of market, nor "vested rights" in the continuation of low 
rates on lumber as sufficient grounds per se for denying an increase, 
The adjustment of lumber rates "lies in the contest between the rail- 
roads and the lumbermen as to whether the rate shall be higher or 
lower within the margin that the traffic will readily bear." 49 

The decisions in the southern pine cases and in the transcontinental 
lumber rate cases cited indicate that rate increases have not been held 
valid on the ground, per se, of increased prosperity in the industry nor 
of the ability of the traffic to bear a higher rate. The rates on ship- 
ments of lumber have not therefore been generally increased as the prices 
of lumber have risen. In fact, the average rates applying over impor- 
tant routes of lumber shipment have remained relatively stable. Thus 
has the market for medium and low grade lumber been greatly extended 
and the conditions of competition between widely separated sources of 
supply much intensified. 

Willamette Valley to San Francisco rate. In 1910 the Interstate 
Commerce Commission denied 50 a rate of $5 per ton (raised in 1907 
from $3.10) on rough common fir lumber from Portland and Willamette 
Valley common points to San Francisco. The railroad (Southern Pacific) 

46 Ibid., pp. 308, 309. The dissenting opinions are in 14 I. C. C. 1-74: see Ann. 
Rep. of I. C. C. 1911, p. 46; also 219 U. S. 433. 
4T Dunn, S. O., op. cit, p. 32. 
*8 32 Supr. Ct. Rep. 109; 222 U. S. 541, 555. 

49 McPherson, L. H., op. cit, p. 138. 

50 14 I. C. C. Rep. 61. 



14 THE ORGANIZATION OF THE LUMBER INDUSTRY 

appealed to the courts. The Supreme Court set aside the restraining order 
on the ground that the Commission, in seeking to protect the investment 
of capital in lumber manufacture, had not been governed by the intrinsic 
reasonableness of the rates. 51 A counter complaint was then filed by the 
lumbermen. In response to the verdict of the Supreme Court the Com- 
mission then permitted an advance in the rate to $3.40. The railroad 
at once appealed to the newly established Interstate Commerce Court. 
In 1912 the Court completely sustained the Commission's order on the 
ground that a carrier, having induced the investment of capital in the 
lumber industry under an implied promise of low rates, is under obli- 
gation to refrain from subsequently charging the limit of what the traffic 
will bear. 52 

Principles asserted in the lumber rate cases. Interstate Commerce 
Commission. In the southern lumber cases 53 the Commission has held 
that lumber rates should be relatively low, because : 

First, the life of the lumber mill is limited, at the end of which 
large investment in plant and equipment is practically valueless. 

Second, traffic in lumber at low rates has yielded the carriers an 
increasing net revenue. 

Third, lumber is inexpensive freight. 

Fourth, lumber furnishes a large and a constant tonnage, i. e., the 
year round. 

Fifth, the minimum carload has been so increased that a car of 
lumber yields a relatively high actual revenue, "greater in nearly every 
case than on articles * * * carrying higher ton-mile rates." 54 

Sixth, lumber is an article of general utility. 

The principles involved in the West Coast lumber cases were almost 
identical. 55 

Supreme Court. The attitude of the Supreme Court on the impor- 
tant question of the adjustment of rates to competitive markets on 
lumber requiring a relatively long haul has been expressed : 56 

"When the section says that no locality shall be subjected to 
any undue or unreasonable prejudice or disadvantage in any respect 
whatsoever, it does not mean that the Commission is to regard only 
the welfare of the locality or community where the traffic orig- 
inates, or where the goods are shipped on the cars. The welfare 



si 219 U. S. 433. 

52 U. S. Com. Ct. No. 59, Apr. Sess. 1912. 

63 Central Yellow Pine Association v. I. C. R. R. Co. 10 I. C. C. Rep. 505; 
Marten v. L. & N. R. R. Co. 9 I. C. C. Rep. 581, 589; Tift et al. v. Southern Railway 
Co. 10 I. C. C. Rep. 548; Tift v. Southern Railway Co. 138 Fed. 753-764; Aff. in 
148 Fed. 1021. 

64 Complaints in Equity, Nos. 883, 884, 885 ; U. S. Circ. Ct. for Distr. of Minn., 
3rd Div., p. 321. 

65 Ibid., p. 212, "It may be fairly stated that this case is on all fours with the 
Yellow Pine Case [10 I. C. C. Rep. 5051 in every essential particular." 

" T. & P. R. Co. v. I. C. C. 162 U. S. 197 ; decided, March, 1896. 



INTRODUCTION 15 



of the locality to which the goods are sent is also, under the terms 
and spirit of the act, to enter into the question. * * * 

"One class of cases, unquestionably intended to be covered 
* * * is that in which traffic from a distance, of a character 
that competes with the traffic nearer the market, is charged low 
rates, because unless such low rates were charged, it would not 
come into the market at all. It is certain unless some such prin- 
ciple as that were adopted, a large town would necessarily have 
its * * * supply greatly raised in price. * * * the public 
have an interest in * * * the carriage at a rate which will 
render that traffic possible, and so bring the goods at a cheaper 
rate, and one which will make it possible for those at a greater 
distance to compete with those situate nearer to it." 

It has been held by the courts that the "public at large is greatly 
interested in competition and the more favorable prices which it brings 
and for that purpose the public is interested in keeping open the larger 
markets of the country to all points of production and supply"* 1 

Where the traffic from a distance can compete with traffic nearer 
the market, the public is interested in having the greater-distance traffic 
carried at rates which will enable it to compete with the traffic which 
is nearer the market. 

Transportation costs as a price influence. As respects the influence 
of transportation costs general lumber prices in the United States have 
been changed : 

First, when the total traffic in lumber has remained constant and 
the same distribution of such traffic has been maintained among the 
several sources of lumber supply, while the rates themselves have been 
either raised or lowered; 

Second, when the rates have remained constant while the propor- 
tion of lumber from the more distant sources has increased. 58 The 
latter type of price influence has been connected, in the United States, 
with a dynamic condition in the lumber industry. It represents one 
way in which the exhaustion of timber supply near to consuming centers 
has affected prices of lumber. This has been well illustrated in the 
history of the North Atlantic lumber markets which have depended 
successively upon lumber: 1, manufactured locally; 2, from Maine and 
from northwestern Pennsylvania; 3, from the Great Lakes region; 4, 
from the South, and recently to an increasing extent ; 5, from the Pacific 
Northwest. 59 

The cost of transportation has increased, other things being equal, 
as the average distance between the sawmill and the market has in- 

57 Italics not in original text; 162 U. S. 197, (217, 218). 

58 E. g., prices of lumber delivered in the market would rise, other things being 
equal, if the proportion of the total supply contributed by each source remained 
constant while the rates from such sources were increased. Or prices would 
similarly rise if the rates from each source remained constant while the proportion 
of the supply increased, which had been contributed by those sources having the 
highest rate on shipments to market. 

09 See infra., Diagram 8, p. 35. 



16 THE ORGANIZATION OF THE LUMBER INDUSTRY 

creased. This cost has of course entered into the selling price of the 
lumber in the consuming market. 60 This factor has accounted for much 
of the difference in price between lumber manufactured under conditions 
of surplus timber and lumber produced under conditions of relative ex- 
haustion of timber supply close at hand. 61 Price changes caused by 
changes in the rates (which may hasten or retard the exhaustion of any 
particular source according as such rates discourage or stimulate compe- 
tition in the same markets from other sources) have no necessary or 
direct connection with price changes due to relative exhaustion. The 
concern of the present chapter is only with the influence of changes in 
the rates. 62 

Influence of changes in rates. From the brief history of the fos- 
tering by the railroads of the lumber industry in certain regions and of 
the attitude of the Interstate Commerce Commission and of the courts, 
upon subsequent increases in the lumber rates, it may be concluded that, 
since 1894, no increases have occurred which have substantially in- 
fluenced general lumber prices. 63 That the general attitude of the Com- 
mission in reviewing lumber rates has not changed is shown in several 
recent orders annulling increases attempted by the carriers. 64 

The grounds cited for the narrow definition of "reasonableness" 
as applied to lumber rates, are such as would have applied in principle, 
ever since the extension of commerce in lumber beyond the limits of 
merely local traffic. The cases cited concern those rates which have 
been the most important in the actual distribution of lumber, i. e., from 
Lake States mills to central markets; from the southern lumber region 
to central and northern markets; from West Coast points to western, 
middle-western and eastern markets. In all these cases the advances 
have either been denied entirely or greatly reduced. It may be there- 
fore assumed that, had any rate increase substantially affected the market 
or considerably lowered the mill price of lumber bearing such rate the 
increase would have been sharply contested. 65 There is no record, how- 
ever, of any contested rate affecting the transportation of lumber from 



60 That is, provided the resort to distant sources is the result of natural con- 
ditions and not an arbitrary and unwarranted attempt to force on a given market 
the product of a distant source when a source nearer the market is capable of 
supplying the entire demand at a lower price. 

61 Ann. Rep. of Dir. of Mint, 1913, p. 68 : "The greatest rise of all [prices] 
in the last 15 years in the United States has been in lumber. * * * All of the 
products of timber have been going higher because near-by supplies were being 
exhausted." 

62 The influence of the increased proportion of the lumber consumed, which 
has been marketed on the higher rates, is treated as one of the phenomena of 
exhaustion of timber supply, in Ch. VI, infra. 

63 That is, permanently. The transcontinental rate increases, pending final 
adjudication for nearly five years, exercised a considerable temporary influence, as 
shown above, upon the prices of West Coast lumber during 1907 and 1908. 

«*E. g., in 1913, I. C. C. Cases Nos. 4763, 4978; opinions, Nos. 2197, 2215. 

65 That lumber tariffs have been frequently contested is shown by the fact that 
the I. C. C. docket on April 11, 1908, showed 37 such complaints. McPherson, L. 
H., op. cit., pp. 289, 290. 



INTRODUCTION 17 



any of the three chief sources 86 of supply to their important consuming 
markets, of which any substantial increase has been approved. Nor, in 
fact, has there been any considerable reduction in such rates since 1894. 67 

Between the period of the panic of 1873 and the era of railway 
and industrial consolidation about 1900 there had been a gradual gen- 
eral decline in rates on competing lines. 68 The reversal of policy since 
that time has had little actual influence on lumber rates. As even a 
partial explanation therefore of the rise in general lumber prices since 
1897, changes in freight rates on lumber, on the average, have been incon- 
sequential. As an incident, however, to the phenomena of relative exhaus- 
tion of timber conveniently located, the length of the average haul to 
market of lumber shipments, has continuously increased. Transportation 
costs have therefore constituted a growing proportion of the delivered 
prices. For example, on the basis of its mill prices for 1911 as recorded 
by the Forest Service, the average transportation cost to competitive 
markets on yellow pine lumber was 36 per cent of the average prices at 
the mill. 69 The proportion for cypress lumber, based on mill prices as 
recorded by the Southern Cypress Manufacturers' Association for 1913, 
was 24.6 per cent. Similar figures for earlier periods are not available. 
These phenomena are of course entirely distinct from those due to changes 
in rates. 



Labor Conditions in the Manufacture of Lumber. 
Although labor has been the most important single productive factor 
in the lumber industry and wages the largest single item in manufac- 
turing costs, labor troubles have been rare. In nearly all branches of 

66 The Lake States ; the southern pine region ; the Pacific Northwest. Among 
the important lumber rates from these sections have been, in cents per 100 pounds. 

Note : Changes only in the rates are given. 

Houston to Omaha : 1900, 23 ; 1908, 26.5 ; 1910, 25. 

Seattle to Omaha: 1887, 60; 1890, 55; 1895, 60; 1899, 50; 1907, 55; 1908, 50. 

Seattle to Chicago: 1887, 60; 1893, 50; 1900, 60; 1908, 55. 

Spokane to Chicago: 1898, 50; 1907, 55; 1908, 52. 

San Francisco to Chicago : 1900, 60. 

New Orleans to Chicago : 1900, 23 ; 1908, 24. 

Hattiesburg to Chicago: 1899, 22; 1900, 24; 1903, 26; 1907, 24. 

Minneapolis to Chicago : 1900, 13 ; 1903, 10. 

Seattle to Minneapolis : 1887, 60 ; 1889, 55 ; 1894, 40. 

Seattle to New York: 1900, 83; 1902, 85; 1903, 80; 1907, 85. 

New Orleans to New York: 1900, 38; 1909, 35. 

Hattiesburg to New York: 1900, 33; 1903, 35. 

Savannah to New York: 1900, 26; 1901, 25. 

Norfolk to New York: 1900, 11; 1903, 12; 1910, 13. 

Memphis to New York: 1900, 31. 
These statistics have been furnished directly by the Division of Tariffs of the 
Interstate Commerce Commission. They are up to date to Feb. 21, 1914. The 
changes since 1894 have not been substantial nor can they have caused any con- 
siderable change in the market price of lumber. 

67 See supra, p. 

68 Ripley, W. Z. op. cit, p. 488. 

69 For. Prod. 1912, p. 50; 62 Cong., 1 Sess., 1911, S. D., Vol. 6, No. 56, p. 774: 
rate. 



18 THE ORGANIZATION OF THE LUMBER INDUSTRY 

the industry there has been, in this particular, surprising stability. 70 
In the southern and West Coast regions employment both in the woods 
and in the mill has normally continued throughout the year. In the 
North, where employment is seasonal, lumber manufacture has formed 
a link in an interesting "industrial chain." The one-crop farming of 
the Mississippi Valley creates a heavy demand for labor at harvest 
time. In the spring many thousands of lumbermen have followed the 
rafts down the river; have followed the harvester from Texas north to 
the Dakotas ; have accompanied the threshers in the North until the early 
winter and have returned on the granger roads to the northern forests. 
In the great lumber producing sections, therefore, practically continuous 
employment has been provided, either directly or indirectly. 

Since 1900 there have been occasional efforts at unionization. In 
1911 "The Brotherhood of Timber Workers/' newly organized among 
the woods- and millworkers of Louisiana and Texas, was met by a brief 
lockout instituted by the "Southern Lumber Operators' Association," 
organized in 1906, to combat unionization among employes. A similar 
lockout occurred in 1912. As a rule, however, lumber manufacture 
has been free from the disputes which have so harassed other indus- 
tries. General mill labor is unskilled; the skilled labor has been well 
paid. 70a Any substantial general curtailment or irregularity of lumber 
production cannot therefore be attributed to adverse labor conditions. 

The Lumber Trade Press. 
The lumber trade journals have been, in general, reliable as sources 
of trade information. Their attitude toward the quotation of current 
prices has been a reflection of their editorial policy. 71 That this policy 
has frequently changed with changes in ownership and in affiliations is 
familiar to the trade. The editor of one of the journals has recently 
said that the "lumber trade journals have not in recent years given the 
accurate data regarding prices which they did ten or twelve years ago." 72 

Both "bulls" and "bears" may be found among their correspondents 
but because of the close relation, in general, between the lumber manu- 
facturers and the journals the "bulls" have predominated. In many 
directions the interests of the producer and of the distributor are iden- 
tical. On the subject of prices, however, interests clash. The manu- 
facturer wants high prices; the distributor who must buy from the 
mill is interested in low prices. The trade press, because of its prac- 
tical dependence upon the manufacturing interests, has tended almost 
invariably to support the manufacturer. 73 The trade, however, has soon 
adjusted its interpretation of quoted prices by a discount proportionate 
to the ascertained "bullish" tendency. In viewing the entire trade lit- 

70 There have been occasional strikes in city lumber yards. These however 
have had little effect upon wholesale prices except as they may have temporarily 
diminished buying bv such yards. 

A. L, Feb. 4, 1905, p. 69. 

70 « Rev. of Rev., Vol. XXVII, 1903, p. 323. 

71 The Lumber Industry, Pt. IV, p. 28. Quotations are of wholesale prices. 

72 Johnston, B. A., ed., Lumber World Review to Smith, Geo. K., Sec. Yel. 
Pine Manuf. Assoc, Dec. 4, 1911; letter. 

™ A. L., Aug. 10, 1907, p. 72. 



INTRODUCTION 



19 




DIAGRAM 3. 
The Range of Lumber Prices. 



20 THE ORGANIZATION OF THE LUMBER INDUSTRY 

erature, it has appeared best, in the interests of better comparability, 
to use relative prices in the present study. Thus the "bullish" (or 
"bearish") tendencies have been reduced to a comparatively small and 
almost constant factor. 74 

Normal Range of Actual Prices. 
There has been, normally, a more or less wide range of variation 
in price, in the same [large] market, of lumber of the same species, 
grade and item. This range (i. e., the difference between the highest 
and the lowest prices paid) of actual sales prices has been less than 4 
per cent under steady market conditions of the modal or representative 
price. Occasionally, since 1897, in certain markets and under abnormal 
conditions, it has been 10 per cent or even greater. The principle is 
illustrated in the accompanying diagram. 75 

In periods of rising prices the range has tended to contract; in 
periods of falling prices, to expand. When prices have reached a high 
point the difference between the mode and the highest price within 
the range has been greater than the difference between the mode and 
the lowest price. On the other hand, when prices have substantially 
declined the difference between the mode and the lowest price within 
the range has been much greater than the difference between the mode 
and the highest price. Thus the lowest prices (see Diagram 3, curve B) 
within the range have tended to rise more rapidly and to fall more 
rapidly than have the highest prices (see curve A). 

"List Prices/' 
An important fact, because of its bearing upon the determination 
of influences affecting the level of general lumber prices, is shown in 
the relation of manufacturers' (or wholesalers') "list" prices to the 
prices of actual sales within the range. During periods of sharply rising 
prices, actual selling prices have been often above "list." When actual 
prices have declined, however, the "list" prices have almost invariably 
been substantially higher than the prices at which actual sales have been 
made. 76 Joint action by lumber manufacturers through their associa- 
tions and through their efforts to maintain association list prices, has 



74 The relative prices hereinafter used, which have been taken from trade 
publications, are almost exclusively for the period before 1897. During this period 
prices published in the journals closely approximated the prices of actual sales. 

75 A represents the upper limit of the range ; B the lower limit ; M the modal 
price or the price at which the bulk of the sales were made. The rectangular lines 
represent the current "list" prices as issued by the several manufacturers' associa- 
tions. The diagram typifies many of the price phenomena presented by the actual 
prices collected, since 1907, by the Bureau of Corporations. Over a million separate 
prices were collected from invoices. For a single item in the same market for the 
same month, as many as 50 separate prices were frequently taken from the invoices 
of several different concerns. These were found to be distributed over a certain 
range. The above diagram is based on the tabulations of such prices. As there 
has been no considerable period since 1897 during which lumber prices have main- 
tained a uniform level it has been possible to study their behaviour only for 
periods of either rising or falling prices. 

76 The effect upon lumber prices attributable to the efforts of associations of 
lumber manufacturers to maintain price lists is discussed in Chapter VII, infra. 



INTRODUCTION 21 



apparently prevented actual prices neither from rising higher nor from 
falling lower than "list." 

Grades of Timber Used in the Manufacture of Lumber. 
Two factors may increase the quantity of lumber in a given market 
received from distant sources : 

First, improved transportation facilities (expressed in lower rates 
to the market). 

Second, higher lumber prices, which increase the ability of the prod- 
uct of distant sources of timber supply to bear existing costs of trans- 
portation. 

The entire accessible supply of timber 77 at any given point in time 
(A) is represented in the following diagram. 

Thus an appraisal, at point A, of the anticipated future stock of 
available timber, classified according to grades, in the order of theii 
prospective utilization, follows the curve AXB. During the years imme- 
diately succeeding such appraisal the finest of the timber is cut, the 
timber resources at successive periods of time thereafter being repre- 
sented by successive points down the line AX and each interval marking 
a nearer approach to the enforced use of medium and low grade (includ- 
ing second growth) timber. But, as the remaining supply becomes of a 
more and more inferior quality, two influences, — first, relatively high 
prices for high grade lumber ; and second, cheaper transportation facilities 
from a more distant source of supply not contemplated in the original 
appraisal, may make available additional supplies of timber of superior 
quality. The actual curve thereafter follows XB, the exact position of 
the critical point X having been determined by the character of the de- 
mand for timber and by the conditions which have made accessible the 
new supply of natural agents. 78 

Conditions of Timber Supply in the United States. 
In the chronology of lumber manufacture in the United States 
successive appraisals of timber supply (from the standpoint of any 
given market) have followed an undulating curve, such as that of which 
only a single node and internode are graphically represented in Diagram 
4. The last remaining source of virgin timber supply in the United 

77 Fernow, B. E., Considerations in Gathering Forestry Statistics ; in Publi- 
cations of American Statistical Association, Vol. VI, New Series, No. 44, 1898 
pp. 164, 165. 

" * * * whether the mills are sawing only logs 10, 12 or 14 inches in 
diameter, as was the practice in the pineries in 1880, or whether they have 
adapted their machinery and methods to scale down to 5 inches, as is now done 
in some parts of Maine and elsewhere, must make a difference in his [the] 
statement of supplies at hand or becoming available." 

78 The opening of the Lake States forests, for example, typifies curve XB'. 
Had the eastern markets continued to depend solely on local supply the curve of 
production relative to eastern markets would have been along AXB. The low 
eastbound transcontinental lumber rates (1894) produced a similar undulation in 
the curve of timber supply tributary to the middle-western markets. For the 
application of this principal from a different point of view, to the New York 
market, see infra., p. 35, Diagram 8. 



22 THE ORGANIZATION OF THE LUMBER INDUSTRY 



Grade of Materia A9ents-Timlrer 




DIAGRAM 4. 
The Available Resources in Standing Timber. 



INTRODUCTION 23 



States has now been requisitioned. A present-day appraisal therefore of 
available future stumpage may be made at point A. No opportunity, 
however, remains, generally speaking, for opening up a hitherto inacces- 
sible supply. Such an appraisal includes a large present stock of timber 
of high grade; beyond it an indefinite perpetuation of medium and low 
grade timber, including stumpage of natural regrowth. Analogy to 
the past history of lumber production indicates, therefore, that the present 
prospect of the future domestic timber supply, lies along the curve AXB. 

It is possible that artificial reforestation 79 and natural regrowth will 
so replenish the supply of high grade agents, and that a reduction in 
per capita consumption of lumber will so decrease the demand for them 
that the necessary supply of timber may become self-perpetuating. The 
crux of the problem of the future lumber supply of the United States lies 
therefore in the task of creating an adjustment of forests wherein annual 
consumption of merchantable timber is replaced by annual regrowth. 80 
Such an adjustment must provide for a suitable proportion of high grade 
timber. Furthermore, the adjustment must be completed before the sur- 
plus represented in the present appraisal, is exhausted. 81 

Former United States Forester, Gifford Pinchot, in an address to 
the National Wholesale Lumber Dealers' Association on the future in- 
fluence of the timber owned by the Government in the national forests 
said that 82 

"it is perfectly obvious the possession of this vast amount of 
standing timber by the government, is going to have a steady effect 
in [sic] prices and is going to prevent the cornering of the product 
by any man or combination of men and is going to act very power- 
fully for the general good. That, we all see, will have a very steady- 
ing effect by the possession of these great areas of timber * * * 



79 Schenck, C. A., Forest Policy, pp. 116-127. 

80 See Compton, Wilson, The Business of Constructive Forestry, A. L., Oct. 10, 
1914, PP. 40-42. 

81 Even considering the more pessimistic view, i. e., of our ultimate dependence 
upon importation for the supply of lumber, first from Canada and later from South 
America or Siberia, the principle remains the same. Such supplies are themselves 
not inexhaustible. Ultimate recourse must be to regrowth. There are many reasons 
for belief in the practicability of the United States maintaining independence of 
foreign sources of timber supply. First, more than one-half of the original stand 
of merchantable timber in continental United States yet remains. Second, a large 
proportion of this remainder, especially in the West, is of high grade. Third, one- 
fifth of the present total supply belongs to the United States; the judicious use of 
this timber would greatly facilitate the adjustment by supplying the demand in 
the meantime. Fourth, there are now substantial efforts at reforestation, especially 
by the United States and by the individual states. Fifth, unnecessary waste in the 
production and consumption of lumber is declining. Sixth, the increasing use of 
substitutes tends toward a substantial reduction in per capita consumption. Seventh, 
higher prices which, other things being equal, will be caused by the probable 
increase in the proportion of lumber received in the consuming centers from the 
most distant sources (i. e., bearing the highest transportation costs) will tend to 
cause an increase in substitution and a further decline in per capita consumption 
of lumber. ^ If these factors be decisive, the prospect of that vague future condition 
in the United States, conventionally referred to as a "timber famine," has been 
frequentlv overrated. 

82 Ann. Rep. Nat. Whol. Lumb. Deal. Assoc, 1907, p. 37. 



24 THE ORGANIZATION OF THE LUMBER INDUSTRY 

which will be put to very vigorous use * * *. This timber will be 
removed under restrictions which will make the forests permanent." 

The application, however, to the future of the lumber supply, of the 
principles evolved out of the historical relation, during any period, of 
lumber prices 83 to the estimated stock of natural agents, does not fall 
within the scope of the present study. 



83 The result of a superficial investigation of this subject by the United States 
Senate has been expressed as follows: "Among the many causes contributing to 
the advance in prices may be enumerated : * * * Reduced supply convenient 
to transportation facilities of such commodities as timber." U. S. Senate, Wages 
and Prices Investigation, 1911, Vol. I, p. 145; in 61 Cong., 3 Sess., S. D., Vol. 63. 



ORGANIZATION OF THE LUMBER INDUSTRY 



25 



CHAPTER II. 

ORGANIZATION OF THE LUMBER INDUSTRY: 
PRODUCTION. 

Magnitude of the Lumber Industry. 
Lumber 1 constituted, in 1909, 59.2 per cent of the value of the 
"Lumber and Timber Products" 2 of the United States. In sixty years 
the annual output, in feet board measure, had increased 790.2 per cent: 







TABLE 1. 








Product 3 










in feet B.M. 


Increase 




Increase 


Year 


(000,000) 


per cent 


Population 


per cent 


1850 


5,000 




23,191,876 


.... 


1860 


8,000 


60." 


31,443,321 


35.6 


1870 


12,755 


59.4 


38,558,371 


22.6 


1880 


18,091 


41.8 


50,155,783 


30.1 


1890 


23,497 


30. 


62,947,714 


25.5 


1899 


35,084 


49.3 


75,994,575 


20.7 


1904 


34,135 


2.7* 






1909 


44,509 
*decrease 


30.4 


9i,972,266 


21.' 



The census figures upon which this table is based are only approxi- 
mations, generally under the truth. 3(Z Changes in methods of enumera- 
tion have impaired somewhat the comparability of these statistics. No 
data from other sources have, however, been available. 

Between 1899 and 1904 the lumber output of the United States 
increased in total value, 11.6 per cent; between 1904 and 1909, 57.1 per 
cent. From 58 million dollars in 1850, the value of lumber and timber 
products increased to 1,156 million dollars in 1909, or 1876 per cent. 
So much greater has been the rate of increase in lumber production than 
in population, that the per capita output which, in 1850, was 216 feet, 



1 Sawed boards, deals, planks, battens, joists, scantling and other dimension 
timbers, rough or dressed, which have undergone no additional manufacture for 
special uses. 

2 $1,156,129,000; (includes the products of saw, lath, shingle and planing mills; 
of logging camps; or veneer and box factories). The value of the lumber alone 
was $684,479,859 in 1909; $435,708,084 in 1904; $390,489,873 in 1899. The classifica- 
tion, "Lumber and Timber Products," is outranked in value (1909) only by slaugh- 
tering and meat-packing, and by foundry and machine shop products. 

Abstract, 13th Census, pp. 442, 508, 509. 

3 The foot board measure is the universal unit of measurement, in the United 
States and in Canada, of lumber, logs and stumpage. It is one foot square by one 
inch thick. Price quotations are almost invariably on the "thousand feet," (M feet 
B. M.). "Stumpage" means standing timber of merchantable quality, i. e., suitable 
for manufacture into lumber. "Logs" are trees trimmed and cut into suitable 
lengths for the sawmill. Unless qualified the word "foot" means hereafter "foot 
board measure." 

a «For. Prod. No. 2, Bur. of Cens., 1909, p. 3. 



26 THE ORGANIZATION OF THE LUMBER INDUSTRY 

has increased to 484 feet in 1909. In per capita utilization of lumber, 
Canada alone with 468 feet (1909) has approached the United States. 
The corresponding total consumption of wood, including lumber, timber 
and firewood, has been estimated (1910) at 260 cubic feet. This is 35.4 
per cent greater than that of Canada; 1900 per cent greater than that 
of Italy. 4 In total and per capita consumption 6 of lumber and wood, 
the United States has led the world. 

Timber Resources. 
There are now about 2.8 trillion feet of standing timber in the United 
States (1911). 6 Of this 78 per cent, or 2.2 trillion feet is privately 
owned. The rest stands in the National Forests, on the public domain or 
in state forests. In the Pacific Northwest stand over 1.5 trillion feet; 
in the Southern States pine region, 650 billion feet; in the Lake States, 
100 billion feet. The remainder, about 550 billion feet, is distributed 
over the Rocky Mountain States, the central hardwood region and the 
Northeastern States. Of this latter classification about 115 billion feet 
are of non-private ownership. 

Over 90 per cent of the government-owned stumpage, or about 500 
billion feet, stands in the Pacific Northwest. This region holds 54 per 
cent of the total remaining supply. Of the 5.2 trillion feet estimated 
to have been the original stand in the United States, the remaining stump- 
age now constitutes 54 per cent. 7 Replacement by annual growth is about 
one-third of the average annual cut. 8 



4 Greater than Russia, 313 per cent; than Germany, 610 per cent; than Great 
Britain and Ireland, 1757 per cent. Zon, R., The Forest resources of the World, 
For. Ser. Bull. 83, 1910, pp. 70, 71. 

5 In 1909, 100 million cords of firewood ; 45 billion feet of lumber ; 15 billion 
shingles; 1 billion posts, poles and fence rails; 140 million cross-ties; 2 billion 
staves; 150 million sets of heading; 400 million barrel hoops; 3 million cords of 
domestic pulpwood ; 165 million cubic feet of round mine timbers ; 1.2 million cords 
of wood for distillation; 1 million cords of tanbark. Kellogg, R. S., Lumber and 
Its Uses, 1914, pp. 316, 317. 

Since the average excess of exports over imports has been inconsiderable, 
domestic consumption of wood products has been practically equal to domestic 
production. Zon, R., op. cit, p. 72. 

6 The Lumber Industry, Pt. I, 1913, pp. 65-77; 79, 80. The value of this timber 
was estimated (1911) at not less than $6,000,000,000. Ibid., p. 31. 

7 Original and Present Timber Supply of the United States : 

TABLE 2. 

Present 

Original Per cent of 

Region (billion feet) (billion feet) original 

Northern 1,000 300 30 

Southern 1,000 500 50 

Rocky Mountain 400 300 75 

Pacific 1,400 , 1,100 79 

Central 1,400 300 21 

Total 5,200 2,500 48 

From : The Timber Supply of the United States, For. Ser. Circ. 166, 1909, p. 6. 

8 Zon, R., op. cit., p. 70 : estimate 28.6 per cent ; also Standing Timber, The 
Lumber Industry, Pt. I, p. 5 : estimate 33 per cent. 



ORGANIZATION OF THE LUMBER INDUSTRY 27 



Extent of the Lumber Industry. 
''The beginning of the Twentieth Century marked, with approximate 
accuracy, an epochal period in the timber and lumber history of the 
United States of America." 9 The Pacific Northwest, stronghold of the 
last source of virgin timber, has begun to ship large quantities of lumber 
to the markets which have been previously supplied by the older regions 
of lumber manufacture. The lumber market is nationwide ; yet not until 
comparatively recent years have remote sections manufactured large quan- 
tities of lumber for other than local consumption. High grade West 
Coast products, despite the heavy transportation costs, have found a mar- 
ket even in the Eastern States. More than five per cent of the annual 
product of West Coast lumber is now marketed in the Atlantic States. 
Fir flooring and finish of superior quality, for example, thus often bears 
a transportation cost to market of from $15 to $18 per thousand feet. 10 
The manufacture of lumber for interstate or interregional commerce is 
now practically co-extensive with the geographical distribution of mer- 
chantable stumpage. 11 

Species of Commercial Importance. 
Ranked according to their importance in the manufacture of lumber 
in 1912, the commercial woods are: 

Per cent of total 12 

Species - Sources cut in 1912 

Yellow pine Southern States 37.6 

Douglas fir Pacific Northwest 13.2 

Oak Central States 8.5 

White (northern) pine Lake States 8. 

Hemlock Lake States; Pa. 6.2 

Spruce New Eng. ; W. Va. 3.2 

Western pine Rock Mt. and Pac. States 3.1 

Maple Mich., Wis. 2.6 

Cypress La., Southern States 2.5 

Poplar Central States 1.6 

These ten species contributed 86.5 per cent of the output in 1912. 
The remainder, distributed among more than a score of different species, 
consisted chiefly of minor hardwoods. All of the species conspicuous in 
the history of lumber manufacture are in the above table. From the 
time of early settlement until the close of the last century, white pine had 
been sought for a range of uses wider than that to which any other 
species has since been found adapted. 13 

The original supply of white pine came from the Northeastern 
States. Crossing New York and Pennsylvania, the center of production, 
after the Civil War, reached the heart of Michigan and the Lake States. 



9 Defebaugh, J. E., History of the Lumber Industry of America, Vol. I, 1906, 
p. 272. 

w 62 Cong., 1 Sess., 1911, S. D., Vol. 6, No. 56, Lumber, p. 720. 
n Kellogg, R. S., op. cit, Table 107, pp. 318, 319. 
12 Forest Products, Lumber, Lath and Shingles, 1912, pp. 10, 14, 15. 
i3 American Forestry, Jan. 1915, pp. 36, 37. 



28 THE ORGANIZATION OF THE LUMBER INDUSTRY 




DIAGRAM 5. 
Proportionate Production of Lumber by Geographical Divisions. 



ORGANIZATION OF THE LUMBER INDUSTRY 



29 




DIAGRAM 6. 
Actual Production of Lumber by Geographical Divisions. 



30 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Within twenty-five years it has shifted to the southern pine region and, 
more recently, for the highest grades of lumber, to the Pacific Northwest. 
The historical shift of sources is shown in the accompanying diagrams. 14 

Of the once abundant white pine there remains, in the Lake States, 
less than 16 billion feet 15 and in the entire United States, less than 23.3 
billion feet of merchantable quality. A most conservative estimate 16 of 
the total original stand at 450 billion feet indicates the extent of the ex- 
haustion that has resulted in the shifts described in the above diagrams. 

The following excerpt from the report 160 by the Chief of the 
Division of Forestry in 1897 on "White Pine Timber Supplies" indicates 
that, during the eighties, the relative scarcity of white pine had been 
exaggerated but that, by the end of. the century, the degree of exhaustion 
had become acute. 

"There are no statistics of timber standing in the United States 
available which can claim to be accurate in any mathematical sense, 
nor would it be possible to ascertain such, if for no other reason than 
that the methods of utilization, which are largely dependent on 
changes of local and market conditions, change the amounts of 
material considered merchantable, harvested, or sawed from a given 
forest growth, the conception of what constitutes merchantable tim- 
ber varying. ■* * * Ever since the publication of the statistics 
of the Tenth Census regarding the white pine timber standing — 
nearly fifteen years — there has been a contention as to their correct- 
ness. Time has proven their extreme inaccuracy, for, while then 
only eight years' supply was supposed to be standing, when the 
annual cut was 10 billion feet, we have, with an increased cut, 
lumbered white pine for sixteen years and still there is a consid- 
erable quantity left. 

"Yet, at last, the end is visible, and even the most sanguine can 
not longer hide the truth that within the next decade we shall wit- 
ness the practical exhaustion of this greatest staple of our lumber 
market." 

White pine contributed only 8 per cent of the lumber manufactured 
in 1912. 

Early Manufacture. 
One hundred years ago logging was practically confined to the coast 
and to the river courses of the East. The early sawmill was the accom- 
paniment of each early settlement. Sawmill equipment then cost from 
60 to 500 dollars. 17 Lumber was sawed to order for neighborhood 
consumption or was floated down the river to be sent to more distant 



14 Diagram 5 shows the percentage of the total cut produced in each of the four 
main historical sources of lumber supply. Diagram 6 represents the actual output, 
classified by grades, of each geographical division. 

"Lumber Industry, Pt. I, p. 78; also For. Prod., 1912, p. 10. 

16 Maxwell, Hu, The Story of White Pine, in American Forestry, Jan. 1915, 
p. 42. 

16 « 55 Cong., 1 Sess., 1897, S. D., Vol. 4, No. 40, pp. 1, 2. 

17 American Lumber, in One Hundred Years of Industry and Commerce, 
(Depew) Vol. I, p. 196. 



ORGANIZATION OF THE LUMBER INDUSTRY 31 

markets, domestic or foreign. The mills were often connected with 
"gristmills" and the log owner paid a toll in kind for the sawing. That 
this method of small scale production continued until the middle of 
the century is attested by the census report, in 1840, of 31,560 "lumber- 
mills. " The average product of each was valued at about 400 dollars. 18 
In 1805 the price in Pittsburgh of choice white pine lumber rafted from 
the mills of western New York was only 5 dollars per thousand feet. 19 

In 1838 were erected the first large sawmills at Willliamsport, Penn- 
sylvania, where were later centered nearly fifty mills. The first mill 
in the Saginaw Valley, the future center of the great pine industry of 
Michigan, was erected in 1832, "to supply early settlers with building 
material; commerce in lumber was unknown here." 20 But the great 
Lake States pineries were as yet unexplored. The panic of 1837 pro- 
duced a "lethargy that existed for some years." 21 Not until 1849 did 
the Lake States white pine industry revive. Thereafter its growth 
was rapid. During the early days in Michigan good white pine lumber 
was occasionally bought at 4 dollars a thousand feet at the mill. 

Geographical Distribution of Manufacture. 
The rapid settlement of the Middle West 22 after the Civil War 
greatly stimulated the development of the lumber industry. By 1870 
had arrived the "golden age" of white pine manufacture in Michigan. 
It spread into Wisconsin and Minnesota. In 1882, while the yellow 
pine lumber of the South was as yet supplying little more than a local 
demand, more than 8 billion feet of white pine alone was cut in the 
Lake States. Ohio and Indiana had been almost denuded of their 
hardwood forests. Lumber was there manufactured as needed for home 
use. Clear-grained black walnut, white oak and hickory logs had been 
cut and ruthlessly burned. 23 The development of the treeless prairie 
states had made heavy demands upon the white pine mills. As the Lake 
States industry declined, a larger and larger market was diverted to 
lumber from the South. Within the past fifteen years West Coast 
lumber has become an active competitor in most of the middle-western 
states. Thus during the period from 1880 to 1900 the sources of lum- 
ber supply have become differentiated from the essentially consuming 
regions. 

The Southern States, 24 the Lake States and the Pacific Northwest 
have (1911) 75 per cent of the remaining standing timber of the United 



18 The exports of lumber and timber products during the preceding fifty years 
averaged less than $5,000,000 per annum. 

19 American Forestry, Jan. 1915, p. 44. 

20 Saginaw Valley Statistics for 1881, E. Cowles, ed., p. 3. This was the first 
steam sawmill in the West. 

2i Ibid., pp. 2, 3. 

22 This movement was greatly accentuated by the Homestead Act, 1861, and 
by other public land legislation. 

23 Farm houses are still standing in the Ohio Valley, the frames for which are 
of black walnut such as is now sought for "kings' table tops." Am. Rev. of Rev., 
Vol. XXXVI, 1907, p. 561. 

24 Includes : Texas, Arkansas, Louisiana, Alabama, Mississippi, Florida and 
Georgia. 



32 THE ORGANIZATION OF THE LUMBER INDUSTRY 

States. 25 In 1912 the same regions produced 64.1 per cent of the lum- 
ber cut. 2 * 5 

Cycles of Lumber Production: Shifts in Sources of Supply. 
In the chronology of lumber manufacture in the United States 
there have been discernible three complete cycles. The fourth — the 
last one possible — has been under way since about 1900. Before 1850 
each region had depended upon its own production or upon a surplus 
near at hand for its lumber supply. The second cycle began in the 
fifties when continuous shipments from the Lake region were made 
to eastern markets. It lasted until the middle or latter eighties when 
the rapid extension of the market for southern pine marked the advent 
of the third cycle. The present century marked approximately the 
beginning of the fourth cycle which is concerned with the great timber 
resources of the Pacific Northwest. Diagram 7 represents the his- 
torical movements which have led to the present distribution of sources 
of supply for the great consuming markets. 27 

The consuming territory described 28 consists of the eastern, cen- 
tral and middle-western markets. Of the eight states leading in lumber 
production in 1850 not one has continued to occupy a similar position in 
1914. Of the eight leading states in 1850, all were east of the Mississippi 
River; three were wholly and one partly east of the Alleghenies. Five 
of the eight leading states in 1912 were wholly or partly west of the 
Mississippi River and two west of the Rocky Mountains. 29 

To show more than the general changes has been impracticable. 
No attempt has been made to show the ever changing proportions be- 
tween the quantities of the different grades of lumber produced. It is 
probable that medium grades now constitute the bulk of production. 
During the seventies and eighties, on the other hand, what are now 
called upper grades predominated. It is obvious, for example, that the 
eastern region has continued to manufacture small quantities of lumber 
of the upper grades. But, as the diagram indicates, it became dependent 
upon the Lake States, between 1870 and 1880, for the bulk of its supply. 
In the early period of surplus white pine manufacture most of the 
product was of the upper or medium grades. Only high grade timber 
was cut. Low grade lumber, as understood today, was relatively un- 
salable until domestic industries were developed and until an increase 
in population enlarged the local market for the low-priced product which 
was incapable of bearing the higher transportation costs to more dis- 
tant consuming territory. 



2R The Lumber Industry, Pt. I, pp. 79, 80. 

26 For. Prod., 1912, p. 8. 

27 Kellogg, R. S., op. cit, p. 317 ; Wood-Using Industries of New York, p. 8. 

28 The data upon which this chart is based have been taken from census records, 
from occasional tabulations by the lumber trade journals, from "Saginaw Valley 
Statistics" relating to the Michigan white pine industry, from monthly reports of 
"Yellow Pine Clearing House," Jan., 1904, to Sept., 1914, and from miscellaneous 
reports by lumber manufacturers' associations on the distribution of hemlock, 
northern pine, redwood and western pine ; also Def ebaugh, J. E., op. cit., Vol. I, 
esp. Ch. 24, 30; Vol. II, Ch. 13-18, 30, 31, 34, 39; Fernow, B. E., Economics of 
Forestry, Ch. 11. 

29 For. Prod., 1912, p. 8. 



ORGANIZATION OF THE LUMBER INDUSTRY 



33 




DIAGRAM 7. 
Successive Sources of Lumber Supply to the Eastern and Central Markets, 1850 to 1913. 
Note : Lowest shaded portion represents the consuming territon^ almost entirely 
dependent, before the Civil War, on local manufacture for local use. The first ship- 
ments from distant sources (Lake States) were of upper grades. The lower grades 
of West Coast lumber, by the end of the period covered, have not reached the central 
markets. 



34 THE ORGANIZATION OF THE LUMBER INDUSTRY 

The consuming region here described has thus continued to supply 
itself with a large proportion of the lumber of inferior quality which 
it has used. The remainder of the lower grade stock it now secures 
from the Lake States and from the South. A considerable amount of 
medium quality lumber is also of domestic production. Most of it is 
secured from the Southern and the Lake States. For high grade mate- 
rial it is now chiefly dependent upon yellow pine and upon West Coast 
lumber. 30 

An investigation of the successive sources of the lumber supply in 
a single market (New York) has shown that, as the sources have 
become more and more distant, a less degree of exhaustion in each 
has been observable before lumber from a still more remote source 
has entered the market. Thus when West Coast lumber first entered 
the New York market (see Diagram 8) there was less evidence of 
exhaustion of southern pine than there had been of northern pine when 
southern lumber first became prominent in the metropolitan yards. 

Since 1900, approximately, every region of the United States, there- 
fore, capable of producing a surplus beyond domestic requirements has 
become an established contributor to the supply of eastern and central 
lumber yards. Of the total original stand of virgin timber one-half 
remains. Of this remainder 54 per cent stands in the Pacific North- 
west. A large proportion of the stumpage of this region has been, 
however, physically inaccessible to adequate transportation facilities. 
Although, under prevailing conditions, the manufacture of timber so 
located has been uneconomical, this potential supply has acted as a 
check to any radical or unwarranted rise in lumber prices. To what 
extent concentration in the ownership of stumpage has interfered with 
the operation of this influence is discussed in Chapter IV. 

The further development of the railway net in the forested regions 
may be expected to continue to diminish the influence upon the lumber 
supply of the relative inaccessibility of standing timber. How the in- 
fluence of the extension of transportation facilities in discounting the 
economic disadvantage of remoteness from the markets has been re- 
flected in the price of timber is illustrated in German experience: 31 

"The relation of the average prices between the district having 
the lowest and that having the highest prices was : 

1860 100:594 

1870 100:380 

1880 100:300 

1890 100:222 

1900 100:174 



3(> The Lake region still produces high grade northern pine in relatively small 
quantities. Lake States hemlock is ordinarily demanded for medium grade uses, 
especially for rough construction. 

31 Conrad, J., Handworterbuch der Staats-Wissenschaften, IV Band, 3d Ed., 
pp. 414, 415. 



ORGANIZATION OF THE LUMBER INDUSTRY 



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DIAGRAM 8. 
Shift in Sources of Supply of Lumber to a Single Large Market, New York. 



36 THE ORGANIZATION OF THE LUMBER INDUSTRY 

"In the year 1905 this relation was, in the case of 

Lumber 100:166 

Firewood 100:234 

Wood of all kinds 100:206 

Rye 100:104" 

Evolution of Technology of Manufacture. 
The technical processes of cutting and delivering logs to the mill 
and of sawing and marketing lumber have been highly developed within 
the last fifty years. Improvement in tools for the woodsman and the 
introduction of steam appliances for taking the logs from the woods 
have greatly increased the efficiency of modern logging methods. Thirty- 
five years ago standing timber not accessible to delivery to the mill by 
water was little valued. Ten years later the mills of Minneapolis, then 
the greatest lumber manufacturing point in the United States, received 
their logs by "drive" down the Mississippi River and its tributaries. 32 
But the continuous recession of timber supply from the water courses 
has led to the use of temporary logging railroads or tap-lines built into 
the woods. In the Southern and the Lake States river drives have thus 
been largely superseded. 

In the Pacific Northwest 33 both methods of log delivery prevail. 
The technique of logging has there attained its greatest perfection. The 
introduction of steam power in logging and of rail delivery of logs has 
made possible a more constant supply of raw material at the mill, less 
subject to the variations in seasonal and weather conditions. The evolu- 
tion of the more expensive modern methods has been caused by the 
increasing inaccessibility of timber. 34 The adjustment of technological 
processes of production to dynamic changes in the conditions under 
which lumber has been manufactured, has been both rapid and precise. 

The Sawmill. 
The most important mechanical developments have been in the 
mills themselves. In 1850 the water mill was the common type. Its sin- 
gle "sash" saw was pulled down by the water wheel and returned to posi- 
tion by the aid of a heavy elastic pole. The adjustment by hand of the 
log carriage and of the "feeding" was generally superseded, between 1870 
and 1885, by many of the mechanical devices which have since made 
possible the great increase in mill capacity. Steam power in the white 
pine region was first used in 1832. Gradually its use spread to all 
departments of lumber manufacture. 35 Among the great mechanical 
improvements have been the endless chain (for running the log into 

32 Am. Rev. of Rev., Vol. XXXVI, 1907, p. 564. 

33 In 1909 more than 1,000 miles of logging railroad were in operation in 
Washington. The average log haul was about 12 miles. 

34 Tenth Census, 1880, Vol. IX, Forest Trees of North America. The maps in 
this report show that the river valleys throughout the eastern forests had been 
logged. In the South and in the Pacific Northwest also much of the timber 
adjacent to river banks had been by that time removed. 

35 There remain today a few small water-mills, mainly in the central hardwood 
belt. Their output is, however, negligible. 



ORGANIZATION OF THE LUMBER INDUSTRY 37 

the mill), the direct steam feed, which has replaced the rope and fric- 
tion appliances; the intricate adjustments of the setting-works, blocks 
and "dogs" ; the steam "nigger," a mechanical log-turning device ; carriers 
for lumber and refuse, and appliances for the return of waste to the 
furnaces. 

There have been also constant improvements in the methods and 
mechanism of trimming, edging and of other operations incident to 
the preparation of lumber for the market. Waste products of manu- 
facture have been greatly reduced. 36 Air-drying in yard piles has been 
gradually superseded, notably in the South Atlantic yellow pine region 
and in the Pacific Northwest, by kiln-drying. This device, perhaps 
the greatest of the more recent improvements in the methods of manu- 
facture, was introduced in 1867. Its use did not, however, become 
general until within the past thirty years. Indeed, it has not been found 
useful in the seasoning of some species, despite the fact that its use 
renders the available supply more responsive 37 to the peculiar current 
conditions of the lumber market. Kiln-dried lumber is frequently mar- 
ketable within five days from the stump. 

Improvements in the saws themselves have, however, been the 
factors most responsible for the greatly increased capacity of the aver- 
age mill. By 1830 the circular or "rip" saw 38 had begun to find favor 
in the United States. By the close of the Civil War most of the lum- 
ber, especially the white pine of Michigan, was cut by it. But the 
"rip" saw was very wasteful of material, cutting a kerf of from y% to 
24 of an inch. 39 Gang saws were introduced into the manufacture of 
the higher grades of lumber where the minimization of waste was of 
greatest importance. 40 



36 In many sawmills all mill "waste" is utilized. The sawdust and trimmings 
are used as fuel ; edgings and slabs are cut into sizes for manufacture into novelties. 
Or the whole may be sent to a chemical plant for distillation. Such plants are 
occasionally an adjunct to the sawmill. See Appendix V. 

37 For example, North Carolina pine can be prepared for shipment, dry, within 
four days from the stump. Such species as northern pine, which are air-dryed, 
require about nine months for seasoning. Use of the kiln-drying method of course 
diminishes the stock which must be carried in yard to meet a sudden demand. For 
example, the "normal stock" — percentage of the annual output — of southern mills is : 

North Carolina, 15 ; loblolly and shortleaf pine. 

Texas, 44; Louisiana, 38; chiefly longleaf pine. 

Georgia and Florida, 13 ; chiefly shortleaf and loblolly pine. 

Alabama, 23 ; longleaf, shortleaf and loblolly pine. 
North Carolina pine is shortleaf and loblolly. 

Because of their proximity to large markets Missouri mills cutting longleaf 
and shortleaf pine, maintain a normal stock of 50 per cent. St. L. L., Jan. 1, 1910, 
p. 63. 

White pine, 40 to 50; Douglas fir, 15; hemlock, 30; spruce, 20; cypress, 55. 
A. L., Statistical Summary, May 25, 1907, p. 5. 

38 Introduced in 1814 from England where it had been in use for several years 
previously. 

39 In early white pine manufacture and in the West Coast mills before the 
general use of the band saw. 

40 Gang-saws consisted of a series of parallel "sash" saws : often 24 or 42 or 
even more. They are often used to saw the merchantable lumber from logs which 
have been trimmed or "slabbed" by a circular saw or by a band saw. Am. Rev. 
of Rev., Vol. XXXVI, 1907, p. 570. 



38 THE ORGANIZATION OF THE LUMBER INDUSTRY 

The modern band saw now used in the best equipped mills was 
practically unknown to lumber manufacture in the United States prior 
to 1880. The economy of material 41 effected by its use forced its adop- 
tion by the white pine mills during the eighties when the industry in 
that region began to decline. It has, in recent years, supplanted the 
rotary saw in the large southern and West Coast mills. In the small 
mills and especially in the hardwood region the circular saw is still 
widely used. The improvements during the past forty years in the 
technological processes of all branches of lumber manufacture have 
been no less conspicuous' than those which have characterized other 
great manufacturing industries. 42 

Development of the Individual Mill. 
Number of mills. Despite the great relative increase in production 
during the past seventy years 43 there has been no considerable increase 
in the number of mills as compared to the increase in the total product. 
The census of 1840 reported 31,560 "lumber-mills," which sawed a 
product valued at $12,943,507 or at approximately $400 per mill. The 
following tabulation shows the changes recorded in the number of saw- 
mills and in the total 44 capital invested in them, since 1850: 

TABLE 3. 





Number of 


Increase, 




Increase, 


Year 


Establishments 


Per Cent 


Capital 


Per Cent 


1850 


18,769 


40.5* 


$ 41,444,364 


.... 


1860 


20,659 


10.1 


74,530,090 


79.8 


1870 


25,832 


25. 


143,493,232** 


92.5 


1880 


25,708 


0.5* 


181,186,122 


26.3 


1890 


22,617 


12.* 


557,881,054 


207.9 


1899 


28,133 


24.1 


611,611,524 


9.6 


1904 


25,153 


10.6* 


733,708,000 


20. 


1909 


40,671 


61.7 


1,176,675,000 


60.3 



* Decrease. ** Expressed in depreciated (1/5) currency. 

It is presumed that in some cases complete returns from small 
mills have not been recorded. The census of 1904 was a less exhaustive 
report upon the lumber industry than was that of 1909. Since, how- 

41 The kerf is only about 1/16 inch or often less. As long as timber was cheap 
and plentiful the rotary saw was, despite its wastefulness, often preferred to the 
band saw. The latter is much more difficult to adjust. Fernow, B. K, American 
Lumber, p. 202. 

42 Ibid., p. 201 ; also, Business and Lumber Trade Conditions, Barnes, W. E., 
ed., No. 33, Nov. 18, 1914, pp. 2, 18. 

43 See supra, p. 25. , 

44 As nearly as can be determined from the census reports these figures include 
all sawmills whether operated separately or in connection with planing mills or 
logging camps (or with both) and all independent logging camps. "Capital" in- 
cludes the investment in dependent logging camps, sawmills and planing mills and 
independent logging camps. The data for 1899, 1904 and 1909 cover sawmills, 
shingle and lath mills, independent planing mills, logging camps, veneer mills and 
box factories. It has been impossible to isolate statistics of sawmills only. Without 
doubt also the changes in the methods of enumeration and of classification have 
diminished the absolute comparability of the figures given. Moreover no consistent 
definition of "capital" seems to have prevailed. 



ORGANIZATION OF THE LUMBER INDUSTRY 39 

ever, the omissions are undoubtedly of small mills only, the data on 
the capital invested are reasonably complete. Between 1850 and 1909 
the number of mills increased 116 per cent 45 as compared with a coinci- 
dent increase in capital invested of 2739 per cent. Thus the increase 
in the capital per mill since 1850 has been 1268 per cent; in physical 
output over 300 per cent. 

Increase in mill capitalisation. The remarkable increase in the 
capital invested in the industry during the decade 1880 to 1890 was 
occasioned, among other causes, by the greatly increased use of expen- 
sive machinery and mill and woods equipment. Probably the most impor- 
tant factor, however, was the practice, among manufacturing interests 
especially in the South, of heavy bonding as a means to the purchase of 
standing timber. Much of the capital, therefore, nominally invested in 
the sawmills was really in stumpage. This period, moreover, marked the 
beginning of the shift of the industry from the Lake States to the 
southern pine belt as did also a similar period fifteen years later, the 
migration of capital to the Pacific Northwest. A large proportion of 
the southern and western mills are now heavily bonded. The customary 
security for such bonds has consisted of standing timber. 

Average mill capacity. That the greater relative increase in aver- 
age capitalization than in physical output has been due in part at least 
to the persistence of a great number of small mills is shown by the 
fact that 84.7 per cent of the mills produced only 22.5 per cent, and 
70.8 per cent of the mills only 12.8 per cent of the total lumber cut in 
1909. The average cut per mill 46 was made by only 15.3 per cent of 
the mills. The product of 84.7 per cent was under the average. In the 
following table the groups are classified according to output in 1909. 

TABLE 4. 

Per cent of Per cent of 
Mill group 47 Lumber cut total mills in total cut 1909 

(feetB.M.) 1909, M feet group in group 

50 M, less than 124,966 9.7 .3 

50 to 500 M 5,582,738 61.1 12.5 

500 to 1,000 M 4,315,636 13.9 9.7 

1,000 to 2,500 M 5,996,043 9. 13.5 

2,500 to 5,000 M 4,072,549 2.7 9.1 

5,000 to 10,000 M 5,291,606 1.7 11.9 

10,000 to 15,000 M 4,078,988 .7 9.2 

15,000 to 25,000 M 6,308,819 .7 14.2 

25,000 to 50,000 M 6,238,229 .4 14. 

50,000 M or over 2,500,187 .1 5.6 



Total 44,509,761 100. 100. 



45 Between 1840 and 1909, 28.9 per cent. It may be noted that the growth of 
the lumber industry since 1850 has been due to no considerable increase in the 
territory of the United States. 

46 See supra, p. 36; i. e., from 266.4 M feet in 1850 to 1094.4 M feet in 1909. 

47 The Lumber Industry, Pt. I. p. 34. 



40 THE ORGANIZATION OF THE LUMBER INDUSTRY 

The Emerson mill, the ''crack" mill of the West, built in Saginaw in 
1835, had an annual mill capacity of 3 million feet. 48 The average output 
per mill on the Saginaw River was 2.6 million feet in 1854; 2.7 million 
feet in 1857. In 1870 it had increased to 7 million and in 1881, the period 
of maximum production in that region, to 13.9 million feet. 49 These 
were then the largest and best equipped mills in the United States. In 
1909, 33.8 per cent of the total output was manufactured in 1.2 per 
cent of the mills, each having a larger annual product than had the best 
Michigan mills in 1881. The average for these mills was 27.4 million 
feet in 1909, or approximately twice that of the Saginaw Valley mills 
in their prime. 50 

In thirty years there has developed no tendency indicating any econ- 
omy inherent in the concentration of lumber manufacture in very large 
mills. An increase beyond 20 or 25 million feet a year in the capacity of 
a sawmill has not increased the economy of adjustment of the different 
productive factors. 51 There has been, moreover, the certain disadvan- 
tage of a long log haul in providing the mill with raw material. That 
maximum productive efficiency, all factors considered, has been secured 
in mills of moderate size, is reflected in the common practice among 
owners of large tracts of timber, of building a number of mills in prefer- 
ence to concentrating manufacture in a single great mill. 

This is the prevailing policy among the owners and manufacturers 
of yellow pine. It is but little less characteristic of the lumber industry 
in the Pacific Northwest. In this condition, prevalent in the industry, 
lies the explanation of the concurrent operation at strategic points, of 
scores of mills manufacturing the same kind of lumber, many often under 
the same or associated managements. 52 



48 Saginaw Valley Statistics for 1881, Cowles, E., ed., pp. 2, 3. This was the 
first white pine mill to enter into commerce in lumber. 

49 Annual Review of the Manufacture of Lumber and Salt in the Saginaw 
District, 1882, p. 8; same 1881, p. 3. 

60 See supra, p. 31. 

51 The Lumber Industry, Pt. I, p. 35. 

52 Ann. Rev. Sag. Dist. 1881, p. 3. 



ORGANIZATION OF THE LUMBER INDUSTRY 41 



CHAPTER III. 

ORGANIZATION OF THE LUMBER INDUSTRY: 
DISTRIBUTION. 

Competition Between Species of Lumber. 
Different species of lumber are often adapted to identical uses. In 
all such cases the scope of potential competition between them is unlim- 
ited. Physical properties are the chief determinant of available uses. 
For certain purposes many species are adaptable; for others only one. 
Thus for framing and for rough construction, fir, western pine, yellow 
pine, North Carolina pine, hemlock, spruce and northern pine are physi- 
cally qualified. 1 Interior finish also permits of the use of a wide range 
of species. In general construction work and in sash, door, blind, and 
general millwork, both softwoods and hardwoods are employed, the 
former greatly predominating. Low grades of several species, especially 
of northern pine, are used in the manufacture of boxes and crates. 

Hardwoods predominate in the furniture industry. Yellow pine, 
fir and white oak enter most extensively into car construction. The mis- 
cellaneous wood-using industries use large aggregate quantities of lumber, 
chiefly of hardwood. Competition is often keen also between lumber of 
the same species from different sources. For example, Lake States 
hemlock has, in recent years, invaded the Buffalo and Erie Canal markets, 
practically driving out the Pennsylvania stock. 2 In turn western hemlock, 
an allied species of similar physical properties, had by 1909 expelled the 
Lake States stock from many of the same yards. 3 

Aside from the questions involved in their geographical distribution, 
it is apparent that different species, of similar physical qualities, have 
actively competed for the majority of important uses to which lumber 
has been devoted. 4 There has been therefore a wide range of potential, 
as well as of actual, substitution of one species for another. 5 

The Lumber Markets. 
The territory tributary to any given source of lumber supply during 
the past fifty years is capable of only general definition. It has been 

1 Lumber for these uses constitutes more than one-half of the current annual 
output; with the addition of planing mill products, nearly three-fourths. For. 
Prod., 1911, p. 3; Kellogg, R. S., op. cit, pp. 168, 169. 

2 A. L., Oct. 24, 1903, p. 57 ; same, Nov. 28, 1903, p. 61. 
3N. Y. L. T. J., Sept. 15, 1909. p. 31. 

4 M. V. L., Apr. 6, 1906, p. 34; same, Nov. 1, 1907, pp. 34, 35; western pine, 
fir, southern pine, northern pine. A. L., Oct. 14, 1905, p. 65 ; same, Dec. 23, 1906, p. 
66; same, Aug. 22, 1905, n. 65; fir, vellow pine, cypress, white pine. N. O. L. T. J., 
Apr. 15, 1907, p. 41; southern pine, fir, northern pine. N. Y. L. T. J., Aug. 1, 1902; 
white pine, because of long standing prestige, preferred to poplar and red cedar, "in 
every way as good for the purpose," which could be bought at several dollars less 
per M feet (Buffalo). 

5 The uses for lumber here enumerated are from the files of the Division of 
Wood Utilization of the Forest Service. 



42 THE ORGANIZATION OF THE LUMBER INDUSTRY 

shown that local production for local distribution was generally charac- 
teristic of the lumber industry before the Civil War. 6 The white pine 
region thereafter became, for thirty years, the center of supply for the 
eastern and central markets. It also furnished a very large proportion 
of the lumber used in the building up of many of the prairie states. 
During this period the Lake States were conspicuously and characteris- 
tically the producers of a surplus of lumber intended for distribution 
in those states in which domestic supply was inadequate. This inadequacy 
in some regions was due to the almost total absence of standing timber. 
Much more frequently, however, especially in the eastern and central 
markets, it was due to the exhaustion of the local supply of timber of 
the particular quality then demanded. Thus the original demand for 
foreign lumber, i. e., lumber from a distant region, has been for the high 
grades 7 which could not be produced at home. 

Reference to Diagram 5 will show that, during the sixties and 
seventies, the white pine industry was rapidly developing in the face of 
a decline, equally rapid, in lumber production in the East. At no time 
can it be said of any particular region of the United States (except of such 
as have produced no lumber at all) that it has been supplied wholly by 
lumber of a given source. Domestic production has been capable usually 
of supplying certain local demands, especially for inferior grades. But 
for the bulk of the medium grade and for practically all the high grade 
lumber, the great consuming regions have now become dependent upon 
shipments from more and more distant sources. The exact changes in 
the degree of this dependence, in the chronology of the past fifty years, 
cannot be determined since, until recent years, no continuous records of 
shipments have been kept. That the centers of lumber production, 
however, have continuously receded from the centers of population, 
indicates that the degree of dependence upon foreign sources has been 
of constant growth. 

Relation of Wood-using Industries to Sources of Supply. 

As the relative scarcity of timber has increased, the demand upon 
the surplus of other regions has extended itself to lower and lower 
grades. The growth of the lumber industry in the Lake States was 
accompanied by the development of other interests which gradually 

6 See supra, Extent of Lumber Manufacture, pp. 27 to 30. 

7 The nature of this demand for the higher grades only for shipment to distant 
markets has been the cause among manufacturers, of utilizing only the best portions 
of the tree and of the log and of leaving the rest in the woods or of discarding 
it as mill waste. Much unreasonable public complaint has been thrust at this 
practice, which has characterized, at certain periods, the manufacture of lumber 
in all the regions (e. g., Lake States ; Pacific States) which have produced a surplus 
for shipment to other territory. The same method has been practiced at all times 
in certain regions which are disadvantageously located or which are unusually 
inaccessible to the market. It is obvious however that as long as the manufacturer 
cannot profitably market low grade lumber, it is uneconomical for him to manu- 
facture it. Provided that he makes reasonable provision, as is now usually done, 
for the diminution of waste, the public question involved is not in fairness, whether 
or not such producer should manufacture only the higher grades of lumber, but 
whether, on account of the unfavorable conditions of his operations, he should 
manufacture lumber at all. The availability at present, however, of any means 
of interference with such manufacture, is not apparent. 



ORGANIZATION OF THE LUMBER INDUSTRY 43 

absorbed the low grade lumber which could not have been profitably 
sent to distant markets. Thus have grown up many of the wood-using 
industries of the Lake region and of neighboring centers which have been 
reached by cheap means of transportation. The furniture industry has 
become centered in Grand Rapids, within the hardwood belt of the Lower 
Peninsula of Michigan. Chicago has become the home of great wood- 
using factories to which lumber of all grades was formerly sent from the 
northern mills by cheap water transportation. 

Market for Low Grades. 
Many of the older sections on the other hand have continued to 
supply themselves with low grade lumber. "Old-field pine" in Virginia, 
a second growth on plantations discarded during the Civil War, now 
furnishes a great deal of material for the manufacture of boxes and 
crates. In this industry Virginia surpasses all other states. 8 In New 
England second growth white pine has been found adequate in quality 
to meet the less exacting requirements for lumber for inferior uses. It 
has moreover proven itself reasonably remunerative to investment. 9 
Domestic production has likewise continued to supply a considerable 
proportion of the local demand in the northern tier of the Central States. 
The softwood lumber consumed in this territory has however come from 
foreign sources, chiefly from the Lake States and from the South. 

Development of Lumber Industry in the South. 10 
As the surplus of the white pine region began to decline during the 
eighties and the early nineties and as the prices of lumber showed a 
relative advance in response to the influence of increasing scarcity of 
supply, southern pine began to replace the higher grades of northern 
lumber in the eastern and central markets. Previous to 1880 North 
Carolina pine had been manufactured almost exclusively for local con- 
sumption. 100 It had then acquired an uncertain foothold in the Balti- 
more and Philadelphia markets. Its first appearance in the New York 
yards was in 1886. This new outlet gave a great impetus to lumber 
manufacture in Virginia and the Carolinas. 11 

Extension of Market for Southern Yellow Pine. 
During this period also, yellow pine from the Gulf States entered 
the central markets in competition with lumber from the North. High 

8 Smith, J. Russell, Industrial and Commercial Geography, 1913, p. 436. Vir- 
ginia consumes more than 400 million feet of lumber annually in the manufacture 
of boxes and crates, or nearly 10 per cent of the total consumption for this 
purpose. 

9 Cook, H. O., Forest Mensuration of White Pine in Massachusetts, 1911, pp. 
20-22. In 1912 white pine lumber manufactured in New England constituted 22.2 
per cent of the total cut in the United States. For. Prod., 1912, p. 15. 

10 The lumber industry was early developed in the South, where it was closely 
associated with the production of naval stores. For many years it led all other 
regions in the exportation of lumber. During the Civil War and the reconstruction 
period, the industry greatly declined. Defebaugh, op. cit, Vol. I, p. 474. 

10 « A. L., Oct. 19, 1907, p. 45. 

11 Same; June 1, 1907, p. 31. The North Carolina pine region includes Virginia 
and the Carolinas. 



44 THE ORGANIZATION OF THE LUMBER INDUSTRY 

grades only were then capable of absorbing the relatively heavy trans- 
portation costs. 12 As the supply of northern pine continued to decline 
an increasing stock of yellow pine lumber of high — and later of medium — 
grade entered the market. Gradually the limits of the territory tributary 
to the northern mills have been driven northward. Yellow pine is now 
to be found in the yards of northern Iowa. 13 It has entered even the 
Lake States themselves; it constitutes, with North Carolina pine, the 
chief supply of the eastern markets. In addition, the domestic demand 
for all grades is met almost exclusively by domestic production. Thus 
southern lumber, since the eighties, as far as transportation costs have 
permitted, 14 has invaded and in large measure appropriated territory 
previously supplied by northern pine. 



West Coast Lumber. 

Lumber manufacture in the Pacific Northwest has been greatly 
stimulated by the reductions, conceded in 1894 by the western railroads, 
in the transcontinental freight tariffs on lumber. By 1900 western white 
pine from the "Inland Empire" had found a ready market in the Middle 
West in place of northern pine. 15 Between 1902 and 1905 cargoes of fir 
lumber of high grade and large dimensions entered the New York market. 
By 1906 fir timbers were there a confirmed substitute for southern pine. 16 
As early as 1899 cargoes of fir flooring had reached Boston, because of 
the high prices prevailing there of maple and of yellow pine stock. 17 
By the period of maximum prices in 1906 and 1907 high grade fir was 
shipped in considerable quantities to the eastern markets. It had secured 
a reasonably secure footing, by 1909, in the Buffalo market. 18 For many 
years previously fir had been a strong competitor in the Chicago market, 
with yellow pine as a material for car construction. 19 Because of the 
relatively light transportation costs however the southern lumber had a 
strong advantage. Indeed when, after the panic of 1907, the price of 
yellow pine suffered a tremendous decline, the market for western lumber 

12 It should be noted that there has been no classification of the freight tariffs 
on lumber. Shipments are made on a commodity rate per 100 pounds. No distinc- 
tion is made in the charges for differences in the grade or the value of the stock. 
The cost of transportation absorbs therefore a greater proportion of the selling 
price in the consuming market, of the low grade than of the high grade lumber. 

13 In 1907 southern lumber constituted four-fifths and West Coast lumber one- 
fifth of the supply at Lincoln, Nebraska. 13 I. C. C. Rep. 319. 

14 Even today only a comparatively small amount of low grade yellow pine 
lumber crosses the Ohio River. As noted above, inferior stock is supplied from 
domestic sources or from the North which is still able to meet the less exacting 
demands. See 206 U. S. 428. 

15 Western white pine "will continue to take the place of northern white pine 
as fast as the output of that product shall decrease." A. L., Jan. 25, 1900; Spokane 
notes. 

16 Southern pine stock in similar sizes was becoming scarce. 
« N. Y. L. T. J., Nov. 1, 1899, p. 16. 

18 The rate per 100 pounds from the Pacific Coast to Buffalo was 70 cents 
or about 21 dollars per M feet on fir timbers S4S, the weight of which averages 
3,000 pounds. Standard List B, Pacific Coast Forest Products, 1913, p. 6. The 
rate to New York or to Boston was 75 cents; to Chicago, 60 cents, as compared 
to a rate to Chicago of from 22 to 25 cents from the yellow pine region. 

!9 A. L., Oct. 25, 1902, p. 50. 



ORGANIZATION OF THE LUMBER INDUSTRY 45 

in territory east of the Mississippi River was practically wiped out for a 
time. 20 

Invasion of Eastern Markets. 
Washington red cedar shingles have recently acquired an almost 
nation-wide market. About the year 1904 they first invaded the Eastern 
Central States. 21 Five years later they were securing most of the trade in 
that region, and were, moreover, competing, apparently on equal terms, 
with cypress shingles in the Southern States themselves. 22 In 1912 nearly 
79 per cent of the shingles manufactured in the United States were of red 
cedar from the Pacific Northwest. 23 Thus within but little more than a 
single decade West Coast lumber had acquired a practically nation-wide 
market for high grade stock. 

The consuming territory dependent upon the western mills for the 
bulk of its supply of all grades, has been extended eastward beyond the 
Missouri River and southward to western Kansas. Competition between 
the three great centers of lumber production is at present very keen in 
Iowa and in eastern Nebraska, a territory to which all have access. 
Western lumber has tended to push the limits of its tributary markets 
east and south. The market for southern pine has extended north and 
east. 24 The competition of southern and western mills has now confined 
the distribution of northern lumber to a relatively narrow range. 25 

Hardwoods. 
A report of the Northern Hemlock and Hardwood Manufacturers' 
Association in 1910 showed the following distribution of the product of 
its affiliated mills. The range described is undoubtedly typical of the 
product of this region. 

Hemlock: Chicago, 19 per cent; Illinois (except Chicago), 9 per 
cent; Minnesota, 8 per cent; Iowa, 8 per cent; South Dakota, Nebraska, 
Missouri, Indiana, Michigan, Ohio, Eastern States, 23 per cent. Con- 
sumed in Wisconsin, 33 per cent. 

Hardwoods: Chicago, 29 per cent; Illinois (except Chicago), 8 per 
cent; Minnesota, 11 per cent; Iowa, South Dakota, Nebraska, Missouri, 
Indiana, Michigan, Ohio, Eastern States, 22 per cent. Consumed in 
Wisconsin, 30 per cent. 

Distribution of Hardwood Product. 
An investigation of four years duration, conducted by the Hardwood 
Record, has shown that the consumption of hardwood lumber in the 

20 St. L. L., Jan. 1, 1909, p. 44; i. e., with the exception of extra wide and long- 
lumber which can be secured only from the western woods. 
2i A. L., Sept. 10, 1904, p. 42. 

22 N. O. L. T. J., Oct. 15, 1909, p. 41 ; same, Nov. 1, 1909, p. 42. 

23 Dept. of Commerce, Special Rep. on Lumb. and Shing. Ind. in State of 
Wash., 1914, p. 9. 

24 Am. Rev. of Rev., Vol. XXXVI, 1907. pp. 566, 567. 

25 High grade white pine, of which little is now manufactured, continues to 
have an extensive market. For certain uses no other species has been found a 
satisfactory substitute. 



46 THE ORGANIZATION OF THE LUMBER INDUSTRY 

United States has been greatly concentrated. Of the total output of hard- 
wood lumber in 1910 of over 8 billion feet, 85 per cent was sold in seven 
contiguous states. 26 In the form of products further manufactured for 
special uses, this proportion has, of course, had a much wider distribution. 
The distribution of hardwood lumber has not been subject to those 
influences which have determined that of softwood lumber. This differ- 
ence has been due to two important conditions. There has been but one 
great source of hardwood supply, i. e., the central region. Hardwood 
lumber, without further manufacture for specialized uses, has had a 
relatively limited range of uses. It may be said to constitute, in general, 
a stage in the manufacture of wooden articles rather than a finished 
product in itself. About ninety-five per cent, on the other hand, of 
softwood lumber, either rough or dressed, is utilized without additional 
manufacture. 27 



Distribution of Lumber for Factory Uses. 
Higher Grades. Wood-using industries dependent upon lumber of a 
particular species or quality have created and fostered a market for such 
wood despite the continued recession of its production from centers of 
manufacture. Such industries have tended to continue in operation in close 
proximity to their consuming territory. The furniture industry, long 
established in the Lower Peninsula of Michigan, now secures from other 
states nine-tenths of its oak lumber and five-eighths of its entire supply 
of all species. 28 In general the location of factories using lumber for 
high grade uses has been adjusted to the easy marketing of the product 
rather than to cheap access to raw material. 29 



26 New York, Pennsylvania, Ohio, Indiana, Illinois, Michigan, Wisconsin. These 
states are centers of wood-using industries. The recent studies of these industries 
by states [see infra, note 29] indicate a marked tendency toward the concentration 
near consuming markets of the manufacture of hardwood for special uses. 

27 In general building and construction, including mill-work; in the manufacture 
of boxes and crates and in car construction. Kellogg, R. S., Lumber and Its Uses, 
pp. 168, 169. 

28 For. Ser., Wood-Using Industries of Michigan, 1912, p. 31. 

29 For. Ser., Wood-Using Industries of Massachusetts, 1910, pp. 8, 9. 

The percentage of lumber used in furniture manufacture, which has been pro- 
duced outside of the state, has been: 

Wisconsin, 45; Wood-Using Industries, 1910, p. 28. 

New Hampshire, 45; Wood-Using Industries, 1912, pp. 59, 62. 

Vermont, 34; Wood-Using Industries, 1913, pp. 69, 70. 

Connecticut, 72; Bull. 174, Connecticut Agricultural Experiment Station, 
1913, p. 27. 

Maryland, 96; Wood-Using Industries, 1910, p. 21. 

Virginia, 30; Wood-Using Industries, 1912, p. 48. 

California, 74; Wood-Using Industries, p. 50. 

Tennessee, 35; Southern Lumberman, May 25, 1912, p. 44. 

Texas, 12; The Lumber Trade Journal, June 15, 1912, p. 37. 

Missouri, 67; St. Louis Lumberman, Mar. 15, 1912, p. 74. 

Kentucky, 22; Wood-Using Industries, p. 37. 
In sixteen states, including Michigan, North Carolina, Illinois and Wisconsin, 
the leading furniture-producing states, 67 per cent of the lumber of the seven chief 
species used in furniture manufacture, was of oak (1912). 

Note : The studies of the secondary wood-using industries of the different 
states, above cited, have been made under the supervision of the Forest Service from 
which copies may be secured. 



ORGANIZATION OF THE LUMBER INDUSTRY 47 

Lower Grades. The manufacture of low grade lumber, in the wood- 
using industries, on the other hand, has been confined to material origi- 
nating in nearby sources. For this purpose the location of the industry 
has tended to become adjusted to the need of cheap access to the raw 
material. The centers of the box and crate industry, utilizing one-tenth 
of the annual lumber cut 30 are distributed in regions to which the supply 
of low grade material — chiefly softwood — is readily available. 31 Thus 
Michigan secures less than three-tenths of the box material currently 
used, from points outside of the state ; Wisconsin one-fourth and 
California one-fifth. Virginia, in which the manufacture of boxes and 
crates is estimated to exceed that of any other state, 32 despite cheap 
access to abundant low grade lumber from North Carolina and Tennessee, 
uses more than three-fifths of lumber of domestic production. Box lumber 
secured from distant sources of supply has been usually high grade 
stock designed for permanent use. The principle is illustrated in the 
statistics of wood-using industries of California, a state almost destitute 
of hardwoods. Its factories have imported hardwood lumber from the 
East in large quantities. Low grade softwood, on the other hand, has 
been either produced within the state or accessible at low cost by cargo 
from Oregon and Puget Sound. 33 

Complete isolation of general phenomena relative to the distribution 
of lumber of low grade has been difficult if not impracticable since most 
of the states concerning whose wood-using industries data are available, 
are themselves the producers of low grade but, in general, not of high 
grade lumber. The evidence has shown, however, the historical tendency 
toward the concentration near consuming centers of industries manufac- 
turing a product of high grade, irrespective of the source, whether distant 
or close at hand, of the supply of the constituent raw material; and a 
much closer adherence to the sources of supply of industries using inferior 
grades of lumber. Low grade lumber of a given origin has not, in 
general, reached distant markets. Thus interstate or interregional com- 
merce in lumber has consisted chiefly of the high and medium grades. The 
market price of low grades has usually been insufficient to absorb the 
costs of transportation from distant sources. 



so For. Prod., 1911, p. 3. 

31 Quoting the sources of note 29, supra, the percentage of box and crate 
material secured from sources outside of the state has been : 

New Hampshire, 44; p. 42. 

Vermont, 60; p. 61. 

Connecticut, 78; p. 21. 

Maryland, 72; p. 15. 

Tennessee, 26; p. 43. 

Texas, 14; p. 37. 

Missouri, 73; p. 72. 
The bulk of the box lumber used in Vermont and Connecticut is low grade 
softwood from Maine. Loblolly pine from Virginia constitutes the chief supply 
of Maryland (p. 15). Missouri secures box lumber from as great a distance as 
Washington and California. This is due to the character of the industry, the 
output of which consists to a large extent of piano boxes, tool boxes, beer crates 
and others, designed for permanent use. 

32 Wood-Using Industries of Virginia, 1912, pp. 36, 38. 

33 Wood-Using Industries of California, p. 21. 



4 8 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Divisions Within the Lumber Industry. 
In the classification of functions within the lumber industry the 
following have been distinguished: 

First, the ownership of standing timber. 
Second, logging. 
Third, manufacture of lumber. 
Fourth, wholesale distribution. 
Fifth, retail distribution. 

The Ownership of Standing Timber. 
The ownership or control of stumpage has been generally but not 
necessarily a condition of lumber manufacture. Most manufacturers 
have owned their own stumpage. 8 * Others have bought logs delivered 
at the mill. Large quantities of timber also have been withheld from 
the saw with deliberate view to higher future prices. 35 That the recent 
tendency toward the consolidation of extensive tracts into single holdings 
has become an important potential influence in the industry is discussed 
in a subsequent chapter. 36 The control of stumpage involves the potential 
control of lumber manufacture through the control of its raw material. 37 
It is generally recognized by the lumbermen as having been the great 
source of profit in the industry, rapidly absorbing any increase in the 
prices of lumber. 38 

Logging. 
The felling of standing timber ; its division into suitable lengths for 
the sawmill ; its delivery by rail or by river drive to the mill, has been a 
distinct industry in many regions. The majority of manufacturers have 
their own woods "crew"; others let a contract to logging companies. 
Such companies have been prominent in the industry on the Pacific 
Coast. 39 In the early period when logs were delivered to the mill almost 
exclusively by water, timber owners frequently surrendered their logs 
at the river bank, to companies of river "drivers," for delivery "in the 
water," i. e., at the mill. In the eastern forests of the United States, 
where delivery is usually necessarily by rail, this custom no longer 
prevails. 

Selling Agencies. Central agencies for the selling of logs or lumber 
have, at times, been a conspicuous part of the distributive mechanism 
in many regions. 

"The success which has attended the establishment of selling agencies, 
formed to distribute the product of manufacturers similarly located" 40 



3 * A. L., Nov. 12, 1910, p. 79. 

38 The Lumber Industry, Pt. I, p. 36. 

"See infra, pp. 61, 62. 

37 The Lumber Industry, Pt. I, pp. 37, 38. 

38 The owner of extensive timberlands in Minnesota and in the Pacific North- 
west, in referring to "a mistaken belief that the manufacture of lumber is a 
profitable business/' added that "the wealth of the lumberman has been made by 
an increase in the value of his timberlands." A. L., Nov. 12, 1910, p. 79. 

3 »The Timberman, Mar., 1907, p. 67; A. L., Mar. 30, 1907, p. 132. 
*° A. L., Feb. 13, 1904, p. 17. 



ORGANIZATION OF THE LUMBER INDUSTRY 49 

has led to such associations among the manufacturers of southern cypress 
and later among those of sugar pine, redwood, fir of Southwest Wash- 
ington, hemlock and maple. In 1904 was organized the Washington 
Logging and Brokerage Company which then controlled sixty per cent 
of the fir log output of the state. 41 There have been many organizations 
among the loggers of the Pacific Northwest. 



Manufacture of Lumber. 

The manufacturer of lumber has frequently exercised all the func- 
tions within the lumber industry. He has owned, cut and manufactured 
his own timber. In addition he has often distributed his own product. As 
a manufacturer, however, his activities have been confined to the pro- 
duction of lumber from the raw material, logs. Only partially applicable 
to the lumber industry is the customary triple classification of distributive 
mechanism, i. e., into manufacturer, wholesaler and retailer. For example, 
one-third of the product of yellow pine lumber is sold direct to large 
consumers such as the railroads and construction companies. The rest 
is sold to wholesalers, brokers and retailers ; most of it to the retail yards 
direct. This type of mercantile organization has prevailed also in the 
marketing territory tributary to the mills of the Pacific Northwest. 42 

"Line-yards." Many manufacturers have operated wholesale and 
retail yards. In the softwood lumber trade the wholesaler, as such, has 
become relatively unimportant; in the hardwood trade he is the chief 
distributive agency. 43 Most of the producers who have discharged mul- 
tiple functions are manufacturers of softwood. Some have owned as 
many as one hundred retail yards distributed throughout their marketing 
territory. Especially in the Middle West had the retail trade, by 1907, 
fallen, to a large extent, into the hands of "line-yard" companies. 44 These 
sold more than one-half of the lumber, chiefly of softwood, which was 
consumed within their spheres of influence. 45 The economy of these 
organizations is obvious in : 

First, buying lumber in great quantities, almost invariably at a 
reduced price. 



Second, auditing of accounts. 



« Same, Feb. 25, 1905, p. 69. 

42 Especially in the "treeless" states of the Middle West. 

43 The predominance of any of the three distributive agencies has been deter- 
mined chiefly by the conditions of the manufacture of the lumber. Lumber 
manufactured from almost pure stands, i. e., of one species only; manufactured by 
mills of large capacity, which confine their output chiefly to a single species, usually 
goes to the retailer or to the consumer direct. But lumber produced from mixed 
stands, i. e., of several species, — this is characteristic of hardwood manufacture — 
by mills of small capacity, is usually marketed through the wholesaler who secures 
the product of a large number of mills. A large proportion of the lumber so 
handled goes direct from the wholesaler to the large consumer. 

44 Includes all companies operating three or more retail yards. 

48 Am. Rev. of Rev., Vol. XXXVI, 1907, p. 574. In 1907, out of the one hundred 
and fifty "line-yard" companies operating in Minnesota and in the Dakotas, fifty 
had headquarters in Minneapolis. Some owned as many as one hundred yards. 
Forty was not an unusual number. 



50 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Third, affording more skillful average management. 

Fourth, the influence of strong combined financial support and 
solidarity, tending to steady the retail market. 

Historically the timber-owning manufacturer has ruled the industry. 
To this rule there have been many specific but no general exceptions. 
The recent relative scarcity and the resultant higher prices of stumpage 
have tended, however, to subordinate the manufacturer, as such, to the 
owner of timber, his raw material. 

Wholesale Distribution. 
Distributing markets have been evolved as a result of the dynamic 
changes in the geography of lumber production. Bangor, Albany, Bur- 
lington, the Tonawandas, Chicago and Minneapolis have been successive 
centers of white pine distribution. In Memphis, Nashville, Cincinnati 
and Chicago has becpme centered a large proportion of the wholesale 
hardwood trade. Chicago now receives lumber from the North, northern 
pine ; from the South, southern yellow pine ; and from the West, fir and 
western pine. 46 In the softwood lumber trade of the West and South, 
"basing points" in strategic locations have, to a large extent, taken the 
place of wholesale centers. New Orleans for cypress ; Norfolk for North 
Carolina pine ; Savannah, Jacksonville, Hattiesburg, Beaumont and Hous- 
ton for southern yellow pine, have been typical in their respective regions. 
Portland and Puget Sound cities for fir; Spokane for western pine; 
Minneapolis for northern pine; Wausau for Lake States hemlock, have 
become important "basing points/' 

As the source of lumber supply has changed the distributive mechan- 
ism has gradually adjusted itself to the demands of economy in the 
transportation of the product to consuming territory. 47 Since lumber is 
very heavy in proportion to its value, differences in the cost of trans- 
portation to market are of great importance. The geographical distribu- 
tion of wholesale centers has been determined chiefly by the demands 
of economy in transportation. 

Associations of Wholesalers. With the many organizations of whole- 
salers this study has but little concern. As lumber distributing agents 

46 An interesting condition has accounted for the ability of three widely 
separated sources of supply to compete for the Chicago — and for the middle western 
markets. Northern pine stumpage is now high in price and relatively inaccessible ; 
the transportation rates — cargo or rail — are low. Yellow pine timber is cheaper and 
more accessible, by logging railroad. Freight rates are higher, i. e., 26 cents per 
100 pounds and the lumber is heavier per M feet. Fir stumpage is much cheaper; 
much of it is accessible to cheap logging methods. The cost of transportation is 
high — 50 cents from Western Washington — but the lumber weighs less per M feet, 
on the average, than does yellow pine. 

The fact should not be overlooked, however, that from another point of view 
accessibility to the market has largely determined stumpage prices. To say that 
stumpage prices determine ultimately the extent of the market for lumber of a 
given origin, is to confuse the cause with the effect. On the other hand "accessi- 
bility" as used in the present statement, refers not to accessibility to any one 
particular market, but to any markets capable of absorbing the product at a net 
price as great or greater than can be secured for it in any other market. 

47 McPherson, L. H., op. cit, pp. 134ff. 



ORGANIZATION OF THE LUMBER INDUSTRY 51 

they have been, as a rule, of comparative unimportance. Of these the 
National Wholesale Lumber Dealers' Association has been the most 
prominent. Its attempts at the classification of "legitimate" trade and 
at the regulation of prices are discussed in a later chapter. 48 

Retail Distribution. 
Lumber used for building and as raw material for the manufacture 
of wood products, where small quantities are consumed, has been 
usually handled by the retailer. As long as the construction of frame 
buildings continues, this division of the lumber distributing agencies 
cannot but be important. On the other hand large wood-using factories 
have tended to buy from the mill direct or from the wholesaler. 49 

In large cities a comparatively small number of yards have handled 
the retail business. Lumber for the construction of buildings finds there 
a sale limited by the increasing use of steel, stone and brick and by strict 
building regulations. Much of the local trade has therefore been confined 
to dealing in miscellaneous stocks. 

Associations of retailers. The associations of retailers have been 
usually limited to intra-state activity. They have frequently endeavored 
to delimit the territory tributary to each retail yard and to prevent any 
transgression of the lines by rival shippers. In defining a "legitimate" 
retail yard they have often "blacklisted" as "unfair" any wholesaler 
who has soM to the consumer direct or to a yard not classified as "legiti- 
mate." 50 

Local retail organizations covering one or more counties have been 
not uncommon. Before the anti-trust laws were rigidly enforced such 
associations often divided the rural territory among the towns. 51 Scales 
of prices were instituted and often strictly observed. In at least one 
large western city the retailers jointly fixed prices and deposited a guar- 
antee to "play fair." A hired secretary kept watch. Any member found 
cutting list prices was heavily fined. This practice, to a large extent, 
has been broken up by the activities of anti-trust investigating committees. 
The restriction of local competition by price agreements and by the divi- 
sion of territory has existed, in the United States, in all degrees of in- 
tensity. Ranging from no restraint to virtual pooling, the competitive 
conditions in the retail distribution of lumber have varied according to 
peculiar conditions in the local trade, to the disposition of the dealers and 
to the activity of prosecuting officers. 

Organisations of Manufacturers. 
The power of the manufacturer has extended to every branch of the 
lumber industry. His control of stumpage has given him a large measure 

48 See infra, Ch. VII, p. 141. 

49 Especially car construction companies ; makers of vehicles, implements and 
fixtures ; shipbuilders and box factories. 

60 Thus a farmers' co-operative yard has often been "blacklisted." The opposi- 
tion of the retailers has been particularly keen to the so-called "supply" houses 
which have advertised lumber at less than retail prices. 

51 Thus a farmer within the territory assigned to town A could not go for 
lumber to town B without being quoted such prohibitive prices that he would be 
forced to buy in town A. 



52 THE ORGANIZATION OF THE LUMBER INDUSTRY 

of control over the production of lumber. His assumption of the func- 
tions of the wholesaler, especially in the softwood trade, and his frequent 
operation of retail ("line") yards have greatly strengthened his influence 
over the distribution of lumber. In the South, but to a much greater 
extent in the Pacific Northwest, large corporations own great forests of 
merchantable timber ; operate large mills ; ship their lumber in their own 
schooners to wholesale or retail yards, which they either own or control. 
They have thus secured the profit at every stage of manufacture and dis- 
tribution from the stump to the consumer. 

Manufacturers have many common interests. Certain forms of joint 
action have therefore been evolved. Lumber exchanges in both producing 
and distributing centers ; boards of trade 52 in manufacturing regions and 
numerous ephemeral organizations have been, for half a century, a part 
of the mechanism of the industry. They have developed with the growth 
of inter- regional commerce in lumber. 53 

Early Permanent Association. 
Purposeful joint activity among manufacturers resulted in a perma- 
nent organization, in 1888, 54 of the white pine producers of Minnesota. 
A second association, of Wisconsin white pine producers, appeared in 
1893. Since that time similar organizations have been formed in every 
important lumber producing region. The first organization of yellow 
pine manufacturers was the Missouri and Arkansas Lumber Association 
(1883), merged in 1890, into the Southern Lumber Manufacturers' Asso- 
ciation. This became, in 1906, the Yellow Pine Manufacturers' Associa- 
tion, representing one-tenth of the total annual output of lumber in the 
United States. The Southwestern Washington Lumber Manufacturers' 
Association, organized in 1900 ; the Pacific Coast Lumber Manufacturers' 
Association (1901), and the Oregon and Washington Lumber Manufac- 
turers' Association (1905), were consolidated, in 1911, to form the West 
Coast Lumber Manufacturers' Association. 

Extent of Organization. 
It was estimated in 1904 that more than three-fourths of the lumber 
shipped, during that year, from Oregon and Washington fir territory, came 
from association mills. 55 The Carolina Pine Lumber Association (1888) 
was succeeded, 56 in 1889, by the North Carolina Pine Lumber Company, 
which represented one-half of the total pine production in its territory. 



52 The Saginaw Board of Trade, for example, was long an influential factor 
in the Michigan white pine industry. It kept an annual record of production, 
shipment and stock on hand ; and of prices of both white pine lumber and stumpage. 

53 The development, during this period, of long distance commerce in lumber 
was the occasion of joint action for certain purposes among manufacturers, in the 
same territory, producing lumber of the same species and competing in common 
markets. These organizations were usually, however, only local and temporary. 

54 This was the beginning of the Mississippi Valley Lumbermen's Association, 
formally organized in 1891 and consolidated, in 1906, with the Wisconsin Valley 
Lumbermen's Association (1893) to form the Northern Pine Manufacturers' 
Association. The membership of this association now controls about nine-tenths 
of the output of northern pine in its territory, Northern Minnesota. 

65 Opinion of the secretary of Pacific Coast Lumber Manufacturers' Association. 
w A. L., Aug. 17, 1907, pp. 45ff. 



ORGANIZATION OF THE LUMBER INDUSTRY 53 

In 1905 its successor, the North Carolina Pine Association (1897), ab- 
sorbed the South Carolina Lumber Association. Over 40 per cent of the 
annual output of North Carolina pine is now controlled by the members 
of this association. The tendency of the organization of lumber manu- 
facturers has clearly been toward a diminution in number and toward an 
increase in the size and relative influence of the associations. 

Minor species. The same tendency has been shown in the history 
of the manufacture of other less important species. The Northwestern 
Hemlock Manufacturers' Association 57 (1894) was merged, in 1910, 
with the Hardwood Lumber Manufacturers of Wisconsin, to form the 
Northern Hemlock and Hardwood Manufacturers' Association. [Hem- 
lock and hardwood have been usually manufactured by the same mills.] 
In 1909 the Spruce Manufacturers' Association succeeded a number of 
informal loose organizations of West Virginia producers. 58 The South- 
ern Cypress Manufacturers' Association, organized in 1905, was the suc- 
cessor of the Southern Cypress Lumber Association, organized in the 
early nineties; the Southern Cypress Co., Ltd. (1898) and its immediate 
successor, the Southern Cypress Lumber Selling Co., Ltd. (1901). This 
association, through its membership, controlled, in 1912, 51 per cent of 
the total cypress output of the United States and 78 per cent of the 
product of Louisiana. 

Hardwoods. The Hardwood Manufacturers' Association of the 
United States (1902) absorbed, in 1902, the Yellow Poplar Lumber 
Manufacturers' Association (1892); and in 1906 the association of the 
manufacturers of hardwood dimension lumber. This is now the largest 
organization of hardwood producers. Its members control one billion 
feet of annual output or about one-twelfth of the total production of 
hardwood lumber. The National Hardwood Lumber Association ( 1896) 
is composed of manufacturers, wholesalers and large consumers. It has 
a present membership larger than that of any other association of hard- 
wood manufacturers. 

Among the minor organizations have been the 

Michigan Hardwood Manufacturers' Association, whose members 
now produce about 700 million feet annually; 

Wisconsin Hardwood Lumbermen's Association, representing, in 
1903, a product of 225 million feet; 

Oak Flooring Manufacturers' Association (1909), controlling about 
65 per cent of the annual product of oak flooring. 

The activities of the associations of hardwood manufacturers have 
been devoted chiefly to a comparatively futile effort to establish uniform- 
ity in grading practice in the hardwood market. 

« The Timberman, May 1. 1897, p. 21. 

«8 N. Y. L. T. J., Jan. 15, 1909, p. 33; St. L. L., May 15, 1909, Pittsburgh. 



54 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Purposes of Association. 
Southern Yellow Pine. Among the yellow pine manufacturers asso- 
ciation activity has been devoted to 

1. Promotion of uniformity in methods of manufacture and terms 
of sale of lumber. 

2. Dissemination, among members, of information concerning the 
production and shipment of lumber; the state of the market; general 
business conditions. 

3. Issuing, or securing the issuance of, price lists for the member- 
ship. 

4. Promoting the restriction of output in periods of depression and 
of low prices. 

West Coast Lumber. The constitution of the Southwestern Wash- 
ington Lumber Manufacturers' Association (1900) stated its object to 
"secure a full understanding of the conditions surrounding the lum- 
ber market; the establishment of uniform rules for grading and 
manufacturing ; the 'establishing of uniform rates and prices ; and for 
the purpose of carrying out such other measures as may be deemed 
for the welfare and in the interests of the manufacturers of lumber." 

The interests of the Pacific Coast Lumber Manufacturers' Associa- 
tion ( 1906) covered a wide range. The two main purposes of its organi- 
zation were to secure higher prices and to establish uniform grading 
practice. 59 But its activities extended also to problems of rail transporta- 
tion and of lumber distribution; tariff revision; extension of markets; 
dissemination of statistics; political activity in reference to lien laws 
and workmen's compensation legislation; adoption of uniform terms of 
sale; prosecution of a vigorous campaign to create a market for odd- 
length lumber (in order to reduce waste at the mill). 

The activities of the Oregon associations were co-extensive with 
those of others in fir territory. 

Northern Pine. The purposes of the Northern Pine Manufacturers' 
Association were 

"The establishment of uniform grades for the inspection of lum- 
ber as the only legitimate basis for more nearly uniform prices." 60 

The recommendation, by the "Price List Committee," of "such 
a basis of price for lumber as in its judgment the conditions of supply 
and demand warrant." 61 

Hemlock. "The principal object" of the Northwestern Hemlock 
Manufacturers' Association "was to take measures to establish uniform- 



59 Opinion of first president of Pac. Coast Lum. Manuf. Assoc, 1906. 

60 Constitutions of 1891 and 1906 ; A. L., Jan. 27, 1906, p. 40. 

61 Constitution of 1906, Art. VIII : "It shall be understood that no member of 
this association is obligated to observe or be governed in any way in the sale of 
his lumber by the prices which may be recommended by the price list committee." 



ORGANIZATION OF THE LUMBER INDUSTRY 55 

ity of grading." 62 For a time "an effort was made to keep members posted 
on the stock situation." 63 In 1898 began the issue of price lists. Efforts 
were made toward "bettering the hemlock situation by closer and better 
organization." 

Minor Species. The associations of North Carolina pine manufac- 
tywers have aimed to establish uniform standards of grading and manu- 
facturing and to "formulate a uniform basis of prices." 64 The West 
Virginia spruce producers issued official price lists as early, at least, as 
1898. 65 To these the association activities appear to have been narrowly 
confined. 66 The activities of the Southern Cypress Manufacturers' Asso- 
ciation, and of its predecessors, have been devoted to the promotion of 
"uniform business methods." Standard grading rules and terms of sale 
by 1906 had obtained general recognition. A well organized statistical 
department has been maintained that the members "can more intelligently 
meet competition." 67 The price activities have been usually conducted 
by a selling agency separate from the association. 68 The efforts at uni- 
formity among hardwood manufacturers have been of comparatively little 
consequence. Effective joint action has been impracticable. A similar 
examination of the activities of other lumber manufacturers' associations 
warrants a number of generalizations regarding the policy of association 
activity. 

The Type of Manufacturers' Association. 
Permanent organizations have been evolved out of informal occa- 
sional co-operation among producers. Originally these have covered 
relatively small areas and have been often limited to manufacturers of a 
single species. A marked tendency has developed since about 1900 toward 
the consolidation of the organized activities of the manufacturers. The 
direction of integration has been determined by two interests, often 
overlapping. The most important interest has been that in joint action 
among manufacturers of a single species. 69 The other has lead to con- 
solidation for common interests among producers of different species lo- 
cated in a certain defined territory. 70 The first is a classification accord- 
ing to species; the second is geographical. Obviously, neither has 
been necessarily exclusive of the other. The associations of softwood 
manufacturers have been in general of the first type. The influence 
therefore which each has exercised over the production and the distri- 
bution of lumber has been concentrated mainly upon a single species. 71 

62 Northwestern Lumberman, May 8, 1897, p. 2. 

*3 Same, Sept. 4, 1898, p. 8. 

e* A. L., Aug. 17, 1907, p. 45. 

«5 N. Y. L. T. J., Dec. 15, 1898, p. 10. 

™ A. L., Nov. 6, 1909, p. 79. 

67 Loc. cit., Proceedings of 1st annual meeting of Southern Cypress Manufac- 
turers' Association, 1906; address of president. 

68 M. V. L., Feb. 18, 1910, p. 40; N. O. L. T. J., Jan. 1, 1911, p. 45g. 

69 E. g., the Yellow Pine Manufacturers' Association ; the Northern Pine 
Manufacturers' Association. 

70 E. g., the Northern Hemlock and Hardwood Manufacturers' Association; 
the Hardwood Manufacturers of the United States. 

71 The individual interests represented in any association have been, of course, 
often powerful in other producing regions and in other associations. 



56 THE ORGANIZATION OF THE LUMBER INDUSTRY 

General purposes. The promotion of uniformity in grading prac- 
tice, in terms of sale and in prices has been the purpose officially assigned 
by their founders, of nearly all of the associations of lumber manufac- 
turers. Their methods and policies have covered a wide range. To in- 
crease the bargaining power of the manufacturer in the sale of his prod- 
uct statistics of the production, visible stock and consumption of lumber 
have been often distributed among the members. The market for com- 
peting species and for substitutes has frequently been described. The 
activity of other industries, general conditions of business, finance and 
politics, crop prospects — in fact, any factors which may influence the 
demand for lumber — have been currently reported by many associations. 
To the extent to which they have exercised the function of disseminating 
such information — a purpose for which they are well equipped — their 
policy has been one of education. 

Price policy. Nearly all of the lumber manufacturers' associations 
in the United States have, since 1897, issued or secured the issuance of, 
uniform price lists in some form. By moral suasion especially, by appeal 
to trade ethics, and occasionally by threat, the observance of adopted 
lists has been insistently urged upon the membership. The estimate of 
the influence upon the lumber industry, especially upon the general 
level of lumber prices, attributable to the administration of this policy, 
has been reserved for a later chapter. It is evident that the price policy 
has grown to a conspicuous place among association activities. 

Where the legality of "official" action has been in serious question; 
or where prosecution has been threatened — the public outcry against the 
"lumber trust" was vigorous in 1906 and 1907 — "official" lists have been 
often discontinued. "Prevailing prices," "ascertained prices," "market 
reports," "market conditions," lists issued by separate publishers or 
by information bureaus, or high "basis" lists with current discount 
sheets have been substituted. In whatever form, however, the price in- 
terests of association members have found expression, there is no indi- 
cation that the purposes or that the results achieved have varied sub- 
stantially. 72 

Uniformity of lists. All of the important associations of manufac- 
turers of white pine, southern yellow pine, fir, western pine, hemlock 
and North Carolina pine, and two associations of hardwood producers 
issued price lists between 1897 and 1906. The lists issued by the asso- 
ciations (or by lumber selling agencies) before 1900 were usually based 
upon actual current selling prices or upon those predicted for the imme- 
diate future. Between 1905 and 1907, during the period of most violent 
public protest against a so-called "lumber trust," official lists were dis- 
continued. "Market reports" and "standard lists," serving, however, the 
same general purpose, have since then continued in some form. From 
close approximations to the actual current sales prices, the quotations in 
the "market reports" and in the "standard lists" have gradually developed 
into "basis" lists. These have been purposely higher than the antici- 
pated actual prices. Current "discount sheets," however, have indicated 
the prevailing "concessions from list." 

72 A. L., July 22, 1905, p. 38; N. Y. L. T. J., Jan. 1, 1906, p. 14; M. V. L., Mar. 

8, 1904, p. 29. 



ORGANIZATION OF THE LUMBER INDUSTRY 57 

Individual lumber manufacturers have frequently issued price lists. 
Many of these have shown an identity with current association lists in 
the prices quoted on so large a proportion of the items, that any distinc- 
tion between them has been obviously a merely formal one. The antic- 
ipation of possible legal complications has induced the interdiction of 
the issue of their own lists, by many associations. Occasionally this func- 
tion has been discharged by an independent publishing firm in whose 
name the lists have been issued. But in many cases the quotations them- 
selves have continued to be supplied by the associations. 73 



The National Lumber Manufacturers' Association. 

Perhaps the first inter-association activity occurred in the effort of 
representative lumbermen from various sections of the United States in 
convention (Cincinnati) in 1897, to plan means for the restoration of 
lumber to the dutiable list. In 1898 the Mississippi Valley Lumbermen's 
Association co-operated with the Southern Lumber Manufacturers' As- 
sociation in promoting a uniform grading system. The extension of this 
system to all lumber producing regions was urged. 74 By 1901 the cordial 
relations between associations in different regions had resulted in informal 
co-operation in many matters of mutual interest. The National Lumber 
Manufacturers' Association was organized in 1902 

"as the outgrowth of an education that has been the direct result 
of our local organizations; * * * to develop that wider field 
now before us and the many problems that can only be solved by 
concerted action of all of the various local organizations in this 
country, put forth through this national body. Our local organiza- 
tions have now expanded until almost the entire territory is cov- 
ered ; in some cases * * * the territory of one association over- 
lapping that of another, with a consequent confusion of prices, grades 



73 For example, the Broughton Standard Price List for northern pine was 
based on data supplied by the Mississippi Valley Lumbermen's Association (loc. 
cit., Letter, Canton Sawmill Co. to A. L. Broughton & Co., publishers, Minneapolis, 
Jan. 22, 1910). The C. A. Smith Company list of July 30, 1908, compared with 
lists current at the same time, issued by six other mills, shows an identity in the 
quotation of 95 per cent of the total number of items, 372. The Broughton Standard 
Price List, revised Jan. 9, 1909, compared with nine individual lists, showed identity 
in seven lists ; variation in 10 of 336 items in another. In the ninth more than 97 
per cent of the quotations were the same. Obviously (and naturally) the individual 
lists were, as a rule, copies of the "standard list." This itself was issued at the 
instance of the association. 

A similar policy was adopted in the Southern States and in the Pacific North- 
west (loc. cit., Letter, C. A. Smith Lumber Company, Minneapolis, to A. L. 
Broughton, Jan. 27, 1906). The directors of the Western Pine Manufacturers' 
Association, Spokane, decided on May 1, 1906, 

"that the association would not in the future issue price lists. The price- 
list committee would, however from time to time decide in its opinion the 
relative values of the different kinds of lumber and that if the members wanted 
lists printed they could get them from the Shaw and Borden Co., Spokane." 

The North Carolina Pine Association, August 16, 1906, substituted the "market 
report" for the association price list. 

74 Loc. cit., Minutes of Mississippi Valley Lumbermen's Association, Annual 
Meeting, 1908. 



58 THE ORGANIZATION OF THE LUMBER INDUSTRY 

of lumber, and manufacture * * * . More uniformity along 
this line can, no doubt, be brought about by this national body." 75 

Official purposes. The official purposes of this inter-association 
activity were: 

"To promote uniformity in methods of manufacture and sale of 
lumber. 

"To unify * * * conflicting interests and eliminate * * * 
elements of friction * * * . 

"To gather and disseminate reliable statistics showing the annual 
production and consumption of the various kinds of lumber manu- 
factured in this country, co-operating with and aiding other asso- 
ciations along this line. 

"To gather, compile and distribute information as to general 
trade conditions in lumber and kindred interests throughout the 
country. 

"To take up for discussion any and all questions of mutual inter- 
est that are National in their character and application * * * . 

"To strengthen the bonds of fellowship and inculcate more 
friendly relations among those engaged in the same calling and occu- 
pation, whose interests are common and lie along almost parallel 
lines * * * ." 76 

Special activities. The National Lumber Manufacturers' Credit 
Corporation, a credit rating bureau operated by the national association, 
publishes semi-annually the financial standing and the rated responsibility 
of lumber dealers. Its influence, however, concerns chiefly the retail 
distribution of lumber. The statistical work of the National Lumber 
Manufacturers' Association has been particularly active since 1910. 
Monthly bulletins are issued, showing the cut and shipments of selected 
representative mills in different regions and the relation of actual prod- 
uct to normal capacity. 77 Of considerable importance to the association 
has been its effort 



75 Loc. cit., National Lumber Manufacturers' Association ; Proceedings of 1st 
Annual Meeting, 1902. Also: 

"When lumber associations were first^ formed, the principal object was to 
obtain uniform prices. This was at that time a prime necessity, because of the 
lack of authentic information as to prevailing prices, demand, and competitive 
conditions. With the very complete organization of information bureaus every 
manufacturer is in position to make his own prices. For example, this asso- 
ciation exchanges information with seventeen associations throughout the 
United States and Canada, and any weakness in market conditions and the 
cause therefor is easily ascertained." Loc. cit., Pacific Coast Lumber Manu- 
facturers' Association, semi-annual report, No. 2, 1906. 

76 Loc. cit., National Lumber Manufacturers' Association, Constitution, 1902. 

77 It has been claimed that these statistics cover 30 per cent of the total output 
of all species. This information makes possible an estimate of the relative con- 
ditions in the lumber market. By comparison with similar previous conditions and 
by analogy, current demand and supply may be ascertained and prospective 
conditions forecasted. Official Report, Tenth Annual Convention, 1912, p. 34. 



ORGANIZATION OF THE LUMBER INDUSTRY 59 

"by wide publicity, to mold public opinion to a more favorable atti- 
tude toward the lumber industry, and to serve as a medium through 
which the industry at large may express itself and exert its influence 
on all matters of common interest." 78 . 

Extent of affiliation. Every important species of lumber has been 
represented in the National Lumber Manufacturers' Association since its 
organization. The membership has increased from six affiliated associa- 
tions in 1902 to eleven in 1914. An annual output of over 16 billion feet, 
or more than 35 per cent of the average total production of lumber in 
the United States, is represented in the constituent organizations. 

78 Loc. cit., Letter, National Lumber Manufacturers' Association to Wisconsin 
Hardwood Lumbermen's Association. Jan. 7, 1910. In 1909 an active campaign 
was conducted for the retention of the duty on lumber. 



60 THE ORGANIZATION OF THE LUMBER INDUSTRY 



CHAPTER IV. 

OWNERSHIP AND PRICES OF STANDING TIMBER. 

Public Land Legislation the Cause of Present Distribution. 
The geographical distribution of merchantable timber in the United 
States has been described. 1 Lavish grants of public land and loose, poorly 
defined and ill-enforced general land laws have been the general historical 
causes of its present ownership. 2 Concerning the administration, for 
example, of the Timber and Stone Act, of 1879, a former Chief of the 
Field Service of the General Land Office, has said : 3 

"In practice this law has resulted in the sale of over 12,000,000 
acres of valuable timberlands, of which fully 10,000,000 acres were 
transferred to corporate or individual timberland investors by the 
entrymen. These lands brought the people or the General Govern- 
ment a gross sum of $30,000,000. At the date of sale they were 
reasonably worth $240,000,000. The profit of over $200,000,000 
went not to the needy settler, * * * but to the wealthy in- 
vestors. Not over a fractional part of 1 per cent of the timber pur- 
chased from the United States under this act is held, consumed, 
or even cut by the men and women who made the entries." 

It has been estimated that in 1870 at least three-fourths of the timber 
now standing was owned by the United States. 4 About four-fifths is 
now under private ownership. 

General Laws. 
An investigation by the Department of Commerce 5 has shown that 
at the beginning of 1911 the supply of stumpage in continental United 
States was about 2.8 trillion board feet. There has been a continuous 
tendency toward concentration in the private ownership of timber, the 
value of which, since its alienation from the public domain, has greatly 
increased. The administration of a public land policy designed to en- 
courage agriculture 6 has given rise to a condition fraught with potential 
peril to the future of the lumber supply. 

1 See supra, pp. 27, 28. 

2 Public Domain, pp. 233. 214-216; 332-356; 543; Report of Public Lands 
Commission, 1905, pp. 67, 72, 73 ; 49 Cong., 2 Sess., 1886, H. Ex. Doc, Vol. IX, No. 
1, Pt. 5. pp. 93-95 (Report of Sec. of Interior). 

3 Report of the National Conservation Commission. 1909, Vol. Ill, pp. 387-389. 

4 The Lumber Industry, Pt. I, p. xvii. 

5 Ibid., p. 3. In 1907 the Department of Commerce was directed by Congress 
to institute an investigation of the lumber industry 

"with the particular object of ascertaining whether or not these high prices 
[i. e., of lumber] have resulted in whole or in part from any contract, agreement, 
or combination * * * or conspiracy in restraint of commerce * * *." 
Reports have been issued on standing timber ; concentration of timber owner- 
ship ; land holdings of large timber owners ; and competitive and market conditions 
in the production and wholesale distribution of lumber; The Lumber Industry, 
Pts. I-IV. 

6 Schenck, C. A., Forest Policy, p. 93. 



OWNERSHIP AND PRICES OF STANDING TIMBER 61 

Special Legislation. 
Paternalistic legislation, and especially land subsidies to the western 
railroads have been the basis of the most conspicuous concentration in 
timber ownership. Of the total privately owned timber in the United 
States, 11 per cent is owned by three corporations (or 23.5 per cent of 
the total for the Pacific Northwest); 15.6 per cent by eight holders; 
21.96 per cent by twenty-two; 31.6 per cent by ninety and 38.4 per cent — 
or approximately one-half (i. e., 48 per cent) of the total in the three 
great producing regions : the Lake States, the southern pine belt and the 
Pacific Northwest — by one hundred and ninety-five holders. Large hold- 
ings are more characteristic of the Pacific Northwest than of the Lake 
States or of the South, where railroad land grants have been relatively 
inconsiderable. Thus one-half of the privately owned timber in the 
Pacific Northwest is owned by thirty-eight individuals or corporations ; in 
the southern pine region, by nine hundred and twenty-five, and in the 
Lake States by one hundred and forty-seven individual holders. 7 



Character and Policy of Ownership. 
The financial strength of many owners has enabled them to withhold 
their timber from use, while the increase in its value has more than 
absorbed the accumulated charges against the holdings, i. e., taxes, in- 
surance, interest on investment, etc. The superior financial resources of 
many of the owners of Pacific Northwest timber enabled them, for ex- 
ample, after the sharp decline in 1907 of lumber and log prices at West 
Coast mills, to substantially reduce their production despite the fact that 
a great surplus sawmill capacity had been erected under the stimulating 
influence of the "boom" prices of the preceding three years. 8 

During the same period, on the other hand, despite curtailment by 
many yellow pine mills, the relative total lumber production of the South- 
ern States greatly increased. 9 Southern timber has been more weakly 
held. 10 Many manufacturers whose enterprises were heavily bonded 
were compelled, during 1907 and 1908, to sell enough lumber at the low 
prices then prevailing to enable them to discharge current obligations. 11 
Others were relieved by the banks in order to prevent the gross over- 
stocking of the yellow pine market. Concentrated ownership and superior 
financial strength have been closely correlated. 12 

7 See supra, p. 26, for statistics concerning the quantity of timber in each of 
these three regions. 

8 Dept. of Com., Spec. Rep. on Lum. and Shingle Ind., 1914, p. 42. 

9 See supra, Diagram 5, p. 28. 

"»A. L, June 25, 1902, p. 47; also Aug. 3, 1901, p. 41 : 

"Price depressing effects are often attributed to the lack of capital of the 

small mills and their necessity to realize early on the lumber they produce." 

11 Evidence recently collected and on file in the Bureau of Corporations 
indicates that in the general financial strength of ownership, fir, white pine and 
cypress timber is the most secure. Hemlock, except in Pennsylvnia, is relatively 
weaker. Southern pine, a large proportion of which is of scattered ownership, is, 
despite the strength characteristic of many large holdings, conspicuously insecure. 
Southern cypress and California redwood are backed by organization the most 
powerful and complete in the lumber industry. 

« St. L. L., Jan. 1, 1909, p. 44. 



62 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Effect Upon Stumpage Prices. 
If concentration in timber ownership has been accompanied, espe- 
cially in the Pacific Northwest, by a greater degree of ability to withhold 
timber from use, the importance of its potential control over the raw 
material of lumber manufacture is apparent. The tendency toward the 
integration of holdings on a large scale has, however, been much less ap- 
parent in the South, the greatest single present source of lumber supply, 
and in the Lake region, than in the West. To show that such potential 
control has in fact been the cause of a rise in the price of timber by 
creating an artificial relative scarcity of supply, it must be demonstrated 
that a scarcity of timber for present use, i. e., manufacture, has actually 
existed. As long as an effective supply, sufficient to meet all current de- 
mands, has remained in the hands of the owners who have been willing 
to sell — or to manufacture — timber at current prices, can a scarcity dis- 
tinct from that measure of scarcity due to the relative total exhaustion 
of timber supply, be said to have existed? 

"Concentration does not imply higher prices/' Of itself the fact that 
a large proportion of the remaining supply of timber stands in large 
holdings and that much of it has been withheld from current use, is 
not proof, per se, that stumpage prices have been increased. Nor does 
it show that such prices have been necessarily higher than they would 
have been, had the ownership been more scattered or had none of the 
timber been deliberately withheld from use. It does show that if the 
current demand at current prices can be entirely met only by resort to the 
timber which is now withheld, the control of such timber will enable 
the owner to force up the price of standing timber as long as the demand 
continues. It shows, moreover, that in such an event the power over 
supply of the individual holding would be in proportion to the quantity 
of timber held ; hence the particular type of power incident to concentra- 
tion, i. e., to large individual holding. Probably also the practicability 
of effective joint action in pursuance of a common policy of timber hold- 
ing would be thereby increased. As long, however, as enough timber 
has been released at current prices to meet the entire current demand, it 
cannot be said that the withholding of a part of the total remaining 
supply of standing timber has necessarily caused an increase in the 
price. 13 As long as timber is not currently produced for current manu- 
facture, the withholding of a part of the present supply is inevitable. The 
purpose of such withholding is not here a pertinent factor. 

Current prices of timber, for utilization in current lumber manu- 
facture, cannot rise above such a price as will still enable the lumber so 
produced to compete in the common markets with lumber that has been 
manufactured in regions where timber is not so withheld from immediate 
use. Current prices, in any region, of stumpage for current use are 
therefore limited by the prices of stumpage in every other, competing, 

13 A check to any indefinite increase in the prices of stumpage has been recently 
interposed by the United States. The Forest Service for several years has offered 
for sale large blocks of mature timber. After advertisement at a minimum price 
fixed by law for at least 30 days, the timber is sold to the highest bidder. Since 
nearly 590 billion feet are so disposable by the Forest Service, the influence upon 
prices, under certain conditions, may be made very substantial. For. Prod., 1912, 
p. 62. 



OWNERSHIP AND PRICES OF STANDING TIMBER 63 

region. As long, therefore, as West Coast manufacturers have continued 
to produce fir lumber and have continued to compete in mid-western 
markets with southern pine, the price of fir timber has not risen beyond 
a point imposed as a maximum by the competition of other species. 

There remains, however, below this maximum price, a range of 
possible lower prices for fir standing timber. In the Pacific Northwest 
the recent demand for timber for speculative holding has tended to hold 
fir stumpage prices to the maximum. No amount of such speculative 
demand can, however, be said to have raised stumpage prices above such 
maximum. For if this had been true, it is obvious that the manufacture 
of fir lumber for sale in competitive markets, would have ceased since, 
by hypothesis, fir would have been unable to compete with southern and 
northern pine. Hence the demand for fir timber for current manufacture 
would have almost ceased. This is, however, contrary to the known facts 
of West Coast lumber manufacture. 

Morover, any assumption that speculative holding of surplus tim- 
ber supplies has increased the price at which fir has been actually utilized 
in current lumber manufacture, implies the existence of two prices for the 
same thing at the same time, i. e., one price for timber to be used at once ; 
another for timber to be held for anticipated higher future prices. It 
is apparent that the principle of competitive timber price fixation has 
applied equally to species in all regions of the United States which have 
competed in the lumber market, with species from any other regions. 
Thus, speculative timber holding in a single region, as for example, in the 
Pacific Northwest, has not per se raised stumpage prices. Only when 
the competition of other regions shall have disappeared, to a degree to 
which there has not been as yet, even in a measure, an approximation, 
can the prices of standing timber be substantially increased through the 
influence of artificial restraint. Historically, the competition between 
sources of timber supply has been very keen. Obviously, therefore, the 
arbitrary withholding of timber from present use, considered as an active 
influence affecting stumpage prices, is largely a problem for the future. 

Principle of competitive timber price fixation. What then has deter- 
mined the prices of standing timber in all lumber manufacturing regions 
of the United States ? Ultimately, the anticipated prices of the lumber to 
be sawed therefrom. This price in turn has been objectively limited by 
the competition of lumber from other sources. This principle has been 
true equally of regions where speculative timber holding has been exten- 
sively practiced as of regions where it has existed to a minimum degree 
only, if at all, provided that, and so long as, such regions have continued 
to manufacture lumber for sale in competitive markets. 14 

Subjective valuation cause of withholding of timber. The price 
at which timber is now held represents the present estimate by the owner 
of the anticipated future uses to be derived from such timber. Evidence 
of this is to be found in the practice of the deliberate withholding of 
timber from present use, because the present owner expects that the 

14 As has been shown in detail, competition between all the producing regions 
has been active. This has been true especially since 1894 when lower transconti- 
nental rates greatly extended the competitive market for West Coast lumber. 



64 THE ORGANIZATION OF THE LUMBER INDUSTRY 

future returns from it will more than compensate him for his waiting. 
In other words, the value which he currently attaches to his timber is 
the estimated present worth to him of the sum of the future prices, 
which he, as the owner, expects to receive for it. 

Classes of Timber Owners. 
Among timber owners there are three distinct classes. 

First, those who, unwilling to use or to sell 15 at current prices, await 
anticipated future increases. 

Second, those who are usually willing to use or to sell at current 
prices because, in their estimation, no sufficient net advantage is to be 
gained by waiting. This is the class of owners upon which taxes 16 and the 
accumulation of other carrying charges, has exercised the greatest in- 
fluence. For any decrease or increase in the annual charges against their 
holdings may drive such owners out of the second class into the first or 
the third, respectively. 

Third, those owners who are either willing, or are compelled, to use 
or sell timber at current prices, whether they be high or low, in order 
to realize upon it currently. 

Attitude toward the present use of timber. As a rule the small 
owners and those whose lumber manufacturing enterprises have been 
heavily bonded have constituted the majority of the third class. As a 
class they are financially incapable of postponing the use or sale of tim- 
ber. When current prices are high, the last two classes will use or sell 
timber ; some of the first class perhaps, also, if the prices of lumber then 
prevailing be high enough. When prices are of medium height, none of 
the first class will use or sell and when prices are low many of the second 
class will join the first class until prices again rise. 

Continuity of upward tendency of stumpage prices. Stumpage prices 
in the United States, however, have tended always to rise. 17 Any de- 
cline, therefore, has been considered as temporary. In periods of depres- 
sion manufacturers, owning their own timber and financially able to with- 
stand a temporary cessation of manufacture, have frequently either re- 
duced their output or have shut down their mills completely, rather than 
to manufacture lumber for sale at prices which would not leave a margin 
for the stumpage used, equal to their estimate of its worth. The manu- 
facturers, however, who fall in the third class of timber owner, have 
sometimes found it necessary, in order to meet their obligations, to in- 

15 The expression "use or sell" is designed to cover all cases where timber is 
disposed of. For example, the same person acting as a timber owner may be 
considered to sell timber to himself in his second capacity as a manufacturer of 
lumber. 

The principle stated may be generalized : No timber owner, unless he be forced 
to dp so, will use his timber in such a way that he, in his capacity as owner, shall 
receive for it a price less than his estimate of the present worth to him (for 
whatever purpose) of such timber. 

16 See supra, p. 6. 

17 See supra, p. 5. 



OWNERSHIP AND PRICES OF STANDING TIMBER 65 

crease their production at an ever decreasing net profit per unit of prod- 
uct. Thus, after 1907, the influence of a substantial curtailment of yel- 
low pine production by many of the larger mills was partially counter- 
acted by a relative overproduction by the smaller and the weaker mills. 18 
As a net result, the proportionate production of yellow pine increased 
from 31.1 per cent of the total production of lumber in 1906 to 32.8 
per cent in 1907 ; to 33.8 per cent in 1908 ; and to 36.6 per cent in 1909. 
During the same period the production of fir lumber, which has been 
on the average in stronger financial holding, decreased from 13.2 per 
cent in 1906 to 11.8 per cent in 1907; to 11.1 per cent in 1908; and to 
10.9 per cent in 1909. 19 

Current Stumpage Prices. 
It may be assumed that, at any given period, the total potential supply 
of timber has been a constant quantity, i. e., incapable of substantial 
relative increase or decrease. The effective supply of timber, however — 
that which is actually on the market or available for current use — has 
varied according to the prevailing stumpage prices. Upon what then 
have the prevailing prices been dependent? Obviously, upon the current 
demand. 

This demand may be for timber, either 

First, for immediate use in the manufacture of lumber, or 
Second, to be held in anticipation of higher future prices. 

Demand with intent to current manufacture. But the demand for 
timber for current manufacture is limited. It cannot absorb the total 
potential supply. Furthermore, other things being equal, this type of 
demand would disappear in case the price at which the supply was of- 
fered were so high that the price paid for the stumpage added to the cost 
of manufacturing it into lumber, either equalled or exceeded the antici- 
pated price of the product. Under such conditions, the manufacture of 
lumber would be suspended. The prices of lumber would then tend to 
rise in response to the diminished supply upon the market. Thus, the 
higher resultant price for lumber would enable the manufacturer to pay 
more for his timber. But, as has been shown, there have been many 
owners of timber either willing to use or to sell, or compelled to do so, 
at whatever price may at any time prevail. 

The price at which standing timber has gone into current manufac- 
ture of lumber, has been limited by the anticipated price of the product. 
It could not therefore have been, on the average, so high as to have re- 
sulted in a net loss to the manufacturer. But the demand for timber for 
the purpose of long time investment would not have sought timber at 
a higher price as long as it could have been secured at the same price 
that the manufacturers were then paying for timber to be immediately 
converted into lumber. For it is obvious that at the same time and for 
the same thing in the same market there can be but one price. The actual 
price is not concerned with (nor does it distinguish between) the different 



"See supra, Diagram 6, p. 29; also monthly reports of Yellow Pine Clearing 
House, Jan., 1907, to Dec, 1909. 

19 For. Ser. Bull. 77, 1906, p. 12; For. Prod., No. 10, 1907, p. 15; For. Prod., No. 
2, 1909, pp. 11, 13. 



66 THE ORGANIZATION OF THE LUMBER INDUSTRY 

purposes behind the current demand for timber, but only with the total 
effective demand, for whatever purpose. 

Timber withholding a potential price influence. It is conceivable 
therefore that nearly all of the potential timber supply might have been 
secured for purposes of long time investment. In such event, the annual 
supply available for current manufacture would have been relatively small. 
Prices would therefore have tended to be proportionately high. Under 
such conditions it would have been true that the prices of timber had 
been raised by the institution of a condition of artificial relative scarcity. 
But the statistics of lumber production and the history of timber holding 
in the United States show clearly that such a condition in the ownership 
of merchantable timber has never existed. 

Historical development of timber ownership. Extensive withholding 
of timber from use or sale in deliberate anticipation of higher future 
prices has been a comparatively recent development in the United States. 
In fact, in the Pacific Northwest, where present concentration of owner- 
ship has become most conspicuous, timberlands generally had no sub- 
stantial value until after the early nineties. The continuity of the holding, 
by the railroads, of great tracts, for example, was due rather to inability 
to sell the timber given to them by the United States, than to a deliberate 
intention to hold such timber for future increases. 20 As a factor affecting 
supply, the concentration of holdings for investment cannot have been 
influential before the period, beginning about 1894, of the extension, 
directly encouraged by the railroads, 21 of the market for West Coast 
lumber. 

Futhermore, in all lumber producing regions, during the entire period 
covered by the present study, a majority of, the owners of timber have 
belonged to the second or the third class above enumerated. They have 
used or sold their timber for purposes of current manufacture. The 
price therefore, at which they have so disposed of their timber, has not 
been, on the average, higher than an amount equal to the expected price 
for the lumber (i. e., produced from it), less all costs of manufacture 
and sale, interest, and a profit at a rate, high enough to command the 
continuation of the enterprise. Stumpage prices have lagged behind the 
prices of lumber during periods of rapid increase in the latter. The raw 
material has, however, always tended to absorb any increase in the mar- 
gin between the costs of manufacture and sale and the selling price of 
the product. The temporary declines in lumber prices have been at the 
expense rather of the manufacturer's profits than of stumpage prices. As 
has been pointed out, such declines have been usually (and justly) con- 
sidered to be of short duration. 

Effect of historical conditions of ownership. The question yet re- 
mains : Why has not the demand for timber for investment as dis- 
tinguished from the demand for current manufacture raised the price 
by reason of an artificial scarcity in the supply available for present use? 

20 E. g., in 1900 the Northern Pacific Railway Company sold to the Weyer- 
haeuser Timber Company, 900,000 acres at the rate of about 6 cents per 1,000 feet 
of timber standing thereon (estimated). The Lumber Industry, Pt. II, pp. 6, 7. 

"See supra, p. 10. 



OWNERSHIP AND PRICES OF STANDING TIMBER 67 

First, while the lumber industry was centered in the Lake States, tim- 
ber was there held for current exploitation, and not as a rule, for long 
time investment. 

Second, the shift to the South was the occasion of a considerable 
degree of investment in southern yellow pine timber with view to higher 
future prices. 

The opening up of the forests of the Pacific Northwest was fol- 
lowed by a marked degree of concentration in the holding of timber and 
of investment with view to future price increments. On the other hand, 
in every producing region and throughout the period of the history of 
lumber manufacture in the United States, a majority of timber owners 
have manufactured lumber currently from their own timber. The price 
which they, as timber owners, have received, cannot therefore have been, 
on the average, higher than an amount which would still have enabled 
them, as manufacturers, to compete with lumber from other sources. 

Concrete application of principle of competitive price fixation. Thus 
southern timber has prevented the price of white pine stumpage from 
rising above a certain competitive maximum. Similarly, West Coast tim- 
ber has imposed a check upon the increase in price of southern timber. 
On the other hand, as long as the West Coast owners have continued to 
manufacture lumber, the price which they as manufacturers have paid 
for their timber has been limited, on the average, by the prices which they 
have received for their lumber. The prices of their lumber, however, 
have been limited by the prices of lumber from competing sources, espe- 
cially by the prices of southern and northern pine. The price of stump- 
age, therefore, in no producing territory can, under known historical 
conditions of surplus timber supply, have risen above a limit imposed by 
the actual or potential competition of lumber from different sources. 

Each region has thus exercised a check upon every other. Maximum 
current stumpage prices in those regions where concentration and with 
holding have been most conspicuous, have been, therefore, determined 
by the competition from other sources in which there has existed a less 
degree of such concentration. 

Effect of exhaustion. If then concentration, per se, in the holding 
of timber has actually exercised any influence tending to increase the 
prices of stumpage, the effect thereof has been insignificant as distin- 
guished from the general effect of relative exhaustion of the total timber 
supply. 22 The power over supply wielded by large holders of timber 



22 It is not to be inferred that the extensive concentration of timber holding, 
for example in the Pacific Northwest, has not had an incidental and inconsiderable 
actual effect upon the past prices of lumber because of a direct influence upon 
stumpage prices. For example, if the total stand of privately owned merchantable 
timber in the Pacific Northwest has been 1,000 billion feet and one-half of it has 
been withheld from present use ; and if the average annual demand for current 
manufacture has been 10 billion feet, it is perhaps reasonable to assume that the 
price of 10 billion feet, at any time, when 500 billion feet are available for use or 
for sale, has not been much greater than it would have been had 1,000 billion feet 
been so available. The effect upon past prices of the withholding of 500 billion 
feet cannot have been substantial. Its potentiality will be realized only when that 
part of the total timber supply which is not so withheld, shall have become virtually 
exhausted. 



68 THE ORGANIZATION OF THE LUMBER INDUSTRY 

which is now withdrawn from use, can become substantially effective 
as a price raising influence, only when, in a greater degree than has in the 
past prevailed, the competition of other sources of supply which are not 
so controlled, shall have declined. 

As an explanation of past prices of lumber, the argument that large 
quantities of timber have been deliberately withheld from use, especially 
in the Pacific Northwest and to a very limited extent only in the North 
and South, is wholly inadequate. Any such interpretation of the fol- 
lowing significant statement of the Department of Commerce, is therefore 
misleading: 23 

"Whatever power over prices [of lumber] may arise from com- 
binations in manufacture and distribution (as distinguished from 
timber owning), such power is insignificant and transitory compared 
to the control of the standing timber itself or a dominating part 
thereof." 

Recent finding misleading. The purpose of the investigation from 
the report upon which this statement has been quoted, has been to make 
"full inquiry into the cause or causes of the high prices of lumber 
in its various stages of manufacture from the log; and the said in- 
vestigation and inquiry shall be conducted with the particular object 
of ascertaining whether or not there exists among any corporations, 
companies or persons engaged in the manufacture or sale of lum- 
ber any combination, conspiracy, trust, agreement, or contract in- 
tended to operate in restraint of lawful trade or commerce in lumber 
or to increase the market price of lumber in any part of the United 
States." 24 

That the authorized investigation was concerned with past prices 
was the opinion of the Bureau of Corporations, by which the investi- 
gation has been conducted: 

"Both resolutions [of the Senate and the House of Representa- 
tives, respectively] call, in substance, for information on the causes 
of the high prices of lumber, and whether or not these high prices 
have resulted from any contract, agreement, or combination in re- 
straint of commerce." 25 

Concentration a problem for the future. It is apparent that the 
finding of a large degree of concentration and of speculative holding of 
timber has been presented as having had a substantial bearing upon the 
course of past prices of lumber. 26 But to know the amount of the re- 
maining supply of stumpage does not explain past prices. Nor has the 
now prevailing extent of concentration and of speculative holding, been 

23 Commissioner of Corporations, Summary of Report ; letter of submittal, 
Feb. 13, 1911, p. 5; in 61 Cong., 3 Sess., S. D., Vol. 85, No. 818. 

24 Senate Resolution ; from The Lumber Industry, Pt. I, p. 2. 

25 Ibid., p. 3. Italics not in original text. 

26 "No answer to the request of the resolution as to the course of prices, or the 
existence of combination and its effect on the lumber business and the public, could 
safely be made without first determining approximately (1) the amount of the 
remaining supply of standing timber, and (2) the degree of concentration in the 
ownership thereof. These facts are basic." Ibid., p. 3. 



OWNERSHIP AND PRICES OF STANDING TIMBER 69 

shown to have been the historical cause of any substantial part of the 
past movements of lumber prices. The facts presented in the above 
finding are proof only of a situation which promises in the future to 
become a serious challenge to public policy. As such it should be identi- 
fied in the scientific investigation of the organization of the lumber in- 
dustry. 

Average Prices of Leading Species. 
The following table shows the average course of stumpage prices 
in the United States for the period 1890 to 1907. That at all times a 
wide range has existed according to the quality, location and accessibility 
of the timber is obvious. Average prices therefore indicate only the 
general movement. The prices also for the later periods are for timber 
which, on the average, is of greater inaccessibility and of quality inferior 
to that of the earlier periods (e. g., 1890). The later prices are therefore 
not strictly comparable to the earlier. They should be increased in 
proportion to the degree of average decrease, since 1890, in the accessi- 
bility and the quality of the then remaining timber of each species. 27 

Furthermore, much of the West Coast timber which was included 
in the determination of average prices for 1907, belonged to the United 
States in 1890 and was therefore not so included. The prices of fir for 
1890 in the following table, 28 are for the highest grades and the most 
accessible of the timber, i. e., that timber which was first alienated to 
private ownership from the public domain. The more inaccessible timber 
in 1890 had practically no value in the Pacific Northwest. For true 
comparability to later fir prices, the earlier must be very substantially 
reduced. To a less degree does this qualification extend also to southern 
pine stumpage. 

TABLE 5. 

Stumpage: average value per M feet (dollars) 

1890 1899 1904 1907 

White pine 3.21 3.66 4.62 8.09 

Yellow pine 81 1.12 1.68 3.16 

Douglas fir 68 .77 1.05 1.44 

Hemlock 1.15 2.56 3.51 4.51 

Spruce 1.74 2.26 3.70 5.49 

Oak 2.37 3.18 3.83 6.52 

Cypress 99 1.58 3.42 4.37 

Poplar 2.14 2.81 3.89 4.64 

Maple 1.69 2.66 3.82 2.50 

27 E. g., the price in 1907 of white pine stumpage, equal in quality and accessi- 
bility to the average stand in 1890, would have been $10 to $12 in place of $8.09, 
which was the price of timber of an inferior average quality, etc. The correspond- 
ing difference in the southern pine prices is considerably less and in the case of 
West Coast timber much less. 

28 Figures for 1890, 1899 and 1904 are from census reports ; those for 1907 
from the reports to the Forest Service. For 1890 a weighted average has been 
constructed from the report of average prices for single species in each individual 
state in which that species is found. Report on Manufacturing Industries, Part 
III, Selected Industries, pp. 604-607. For example, the average price for oak has 



70 THE ORGANIZATION OF THE LUMBER INDUSTRY 

The actual relative increase, as already noted, has been obscured by 
the depletion of the higher grades of many species. Furthermore, the 
"range" in the current prices of timber of the same species invalidates any 
attempt to arrive at a "representative" price of stumpage. 29 Whatever 
may have been the variations, however, the prevailing prices for all species 
have greatly increased. The actual increase may be shown more accu- 
rately in the course of prices for identical tracts of timber of a single 
species. 30 

Douglas Fir. 

During the eighties the prevailing price of stumpage in Washington 
was not over 15 cents per M feet. 31 Between 1898 and 1908 prices 
trebled. A stand of 8 million feet (estimated) was bought in 1891 for 
$800 or for 10 cents per M feet. In 1909 the same tract was sold for 
$18,500 or for $2.31 per M feet. As late as 1903 a stand of 472 million 
feet (estimated) was purchased at 12.9 cents per M. In 1907, 59 cents per 
M was offered for the entire tract. A great deal of the timberland of 
the Pacific Northwest has been alienated from the public domain under 
the general land laws. Some of the timber in select areas has thus been 
sold by the United States at less than 4 cents per M feet. Similar con- 
ditions have largely prevailed in Oregon which now has a greater supply 
of merchantable timber than has any other state. Because of the ex- 
tremely low original prices, a very large relative increase in stumpage 
prices in the Pacific Northwest does not necessarily imply a great absolute 
rise. 

Southern Pine. 

In 1909 a tract of timber in Louisiana, containing 302,224 M feet 
(estimated) was sold at $3.72 per M. More than four-fifths of this timber 
had been purchased from the United States in 1881 at a price of less 
than 8 cents per M feet. In southern Georgia longleaf yellow pine was 
bought in large quantities in 1872 at an average price of less than 6 cents 
per M. Timber of similar quality and location, of which but little remains, 
is now worth $4. A company manufacturing North Carolina pine, paid 
in 1895 for its timber rights an average price of 40 cents per M feet; in 
1900, 67 cents; in 1907, $1.75, and in 1909, $2.28. Practically every 
instance of phenomenal increase in price has concerned timberlands 
bought from the United States or from the state governments. Without 



been computed as follows from the average prices for individual states : Tennessee 
(4) ; Arkansas (4) ; Ohio ((3) ; Indiana (3) ; West Virginia (3) ; Kentucky (4) ; 
Pennsylvania (2) ; Virginia (2) ; Mississippi (1). The numbers in parenthesis 
are the weights accorded, determined according to the proportionate production 
of oak by each state included. 

29 E. g., in a single county in North Carolina between 1906 and 1907 the price 
of pine timber ranged between 50 cents and $10 per M feet. In 1907 white pine 
prices (average) varied from $1.56 in Alabama to $11.51 in Wisconsin; to $10.78 in 
Michigan. Longleaf yellow pine prices ranged between $1.50 and $5.40; cypress 
between $1.50 and $12; fir between $1.11 in Oregon and $3 in New Mexico. For 
individual tracts in Washington fir prices varied from 50 cents to $5 per M feet. 

80 These data are from the records of the Bureau of Corporations, now merged 
in the Federal Trade Commission. They have been collected by special agents 
from the records of the manufacturers and the timber owners in the several 
regions. 

31 When stumpage was cheap the conventional sales unit was the acre of 
timberland. It is now the thousand feet. Amer. Forestry, Jan., 1915, p. 9b. 



OWNERSHIP AND PRICES OF STANDING TIMBER 71 

reference to the original low prices of timber, statements of the subse- 
quent relative increase are easily deceptive. 32 



Northern Pine. 

In 1880 white pine timber in Minnesota was secured at an average 
price of from 50 cents to $1. At the same time it was worth $5 in many 
parts of Michigan, where merchantable timber was becoming scarce. 
Until after the Civil War white pine timberlands in Michigan were bought 
from the United States at from $1.25 to $2.50 per acre. After about 1880 
stumpage prices in the Lake States advanced rapidly, until the improved 
facilities for the transportation of southern lumber brought yellow pine 
into sharp competition with it in northern markets. Since about 1890 
therefore northern stumpage prices have been subject to the actual or 
the strong potential check of competition from other sources. 33 

Since 1880 the State of Minnesota has sold nearly 1.5 billion feet of 
timber from the State lands. Since the State is a large owner it has been 
able to bargain with strong buyers on equal terms. The following prices 
are therefore "top" prices, somewhat higher than the prevailing prices, 
but representative of a consistent and continuous sales policy on the part 
of the State. As of all other species, however, the comparability of these 
prices is subject to discount. 34 



1880 


$1.47 


1891 


$2.14 


1902 


$8.38 


1881 


1.62 


1892 


1.89 


1903 


6.02 


1882 


1.57 


1893 


1.83 


1904 


7.71 


1883 


1.77 


1894 


1.80 


1905 


7.18 


1884 


2.11 


1895 


2.18 


1906 


9.00 


1885 


1.73 


1896 


2.06 


1907 


7.83 


1886 


2.19 


1897 


2.52 


1908 




1887 


2.35 


1898 


2.86 


1909 


7.53 


1888 


2.54 


1899 


2.64 


1910 


1 


1889 


2.18 


1900 


5.17 


1911 


\ 8.00 ? 


1890 


2.25 


1901 


5.93 


1912 










1913 


J 



32 E. g., in the Arkansas hardwood region a large holding was acquired in 
1880 through the purchase "for taxes," at a price per M feet of timber of less than 
2 cents. A part of this holding was sold in 1904 at a relative increase of more than 
100 fold. The absolute price, however, was less than $2.50. 

33 By reference to Table 5 it is seen that by 1890 white pine stumpage had 
attained a comparatively high price level; but that since then the relative increase 
has not been as conspicuous as has that of many other species. 

34 That is, the commodity for which the price is given has not remained the 
same or similar. The later sales have been of the more remote timber. Moreover, 
whereas white pine only was considered in 1880, the recent prices represent an 
admixture of red pine, spruce, tamarack, etc., under the collective name of 
''northern pine." It is impracticable to determine a scale upon which later prices 
should be increased in order to secure strict comparability to those of 1880. 

35 A letter from the Auditor of the State of Minnesota, Nov. 2, 1914', stated 
that this has been, since 1909, the average price received for northern pine stumpage. 



72 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Other Species. 
The prices of all other important species have also greatly increased. 36 
In 1880 "hemlock went begging"; 360 it is now a substantial competitor 
of all softwood species in the central markets. There is no indication 
that, in the behavior of stumpage prices, up to the present time, there 
has been a substantial, if indeed any, difference between the regions 
where concentration has been conspicuous and those where it has been 
inconsiderable. Nor can the actual increase in prices be accurately esti- 
mated for the reasons above described. Timber of such species, grades 
and sizes 37 is now cut for manufacture into lumber, as would not, in 
1880, have been even included in the estimate of the stumpage on a given 
tract. Figures for recent years therefore tend to considerably understate 
the true relative rise. The phenomena of the changes in the prices of 
timber in the Pacific Northwest, even when all these factors have been 
considered and due allowance made for them, indicate the operation of no 
price-fixing influence different from that which has occasioned a coinci- 
dent rise in the prices of timber in both the North and the South. If, in 
the past, the condition of concentration of holdings has been a distinct 
cause of high stumpage prices, the effect attributable to it has been 
inconsiderable. 

Stumpage Prices and "Cost of Production." 

The "cost of production" of virgin timber in the United States has 
been merely the cost of making it accessible. The additional cost of "pro- 
ducing" logs has been merely a "harvesting" cost. This condition in the 
production of lumber has given rise to an agitation for higher timber 
prices on the supposition that no one will undertake to grow timber until 
the price of stumpage has reached the cost of growing it. This theory, 
originally espoused by conservationists, has been but recently advocated 
among timber owners themselves. 38 

Fallacious Conception of "Cost of Production." To what extent the 
policy of holders has been influenced by this view, available data are 
incompetent to show. Both large and small owners have, however, come 
to appreciate the fact that their timber is a part of a rapidly diminishing 
natural resource. The tendency to withdraw timber from present use 
has been doubtless strengthened by this propaganda. Whatever influence 
may have resulted, will have been exercised almost exclusively, however, 
upon the future conditions of timber supply. 

The fallacies involved in this conception are : 

First, higher prices encourage heavier, (as well as cleaner) cutting 
of timber and would only accelerate the approach of exhaustion. The 

36 E. g., cypress stumpage which was sold in 1890 for $1 was purchased in 
1908 for $5 per M feet. In 1888 a less accessible stand of cypress in Louisiana 
cost about 15 cents per M. The price for the same timber in 1908 was $6. In 
1890 hemlock timber in Wisconsin had almost no market price. In 1898 it was 
worth $1 and in 1907 from $4 to $5 per M feet. Similarly western pine, western 
white pine and larch timber prices were from 4 to 6 times as high in 1911 as 
they had been in 1900. Even then, however, only a small proportion of such tim- 
ber in the Pacific and especially in the Rocky Mountain States was worth over $2. 

86 «55 Cong., 1 Sess., 1897, S. D., Vol. 4, No. 40, p. 2. 

37 Considerations in Gathering Forestry Statistics (B. E. Fernow), Publica- 
tions of Am. Stat. Assoc, Vol. VI, 1898, pp. 164, 165. 

38 Southern Lumberman, Dec. 24, 1910, p. 73. 



OWNERSHIP AND PRICES OF STANDING TIMBER 73 

very end for which higher prices have been advocated would thus tend 
to defeat itself. 

Second, the willingness or purpose to grow timber at the present 
time is in no sense dependent upon present stumpage prices. It depends 
upon the price which the prospective grower thinks he can get for his 
timber in the future, when it is ready to cut or when the owner is ready 
to dispose of his interest. Therefore no solution of the problem is to be 
found in present prices and, indeed, only a partial solution in the antici- 
pated prices of timber, 30, 50, 100 or more years hence. 

There is in addition the important question of the possibility of 
securing the investment of capital in an enterprise the return from which 
is necessarily long postponed and contingent upon the realization of an 
anticipated price. 39 This price itself is subject to the possible intervention 
of changes in the demand for lumber and for other forest products. 
These changes cannot be predicted. Moreover under the present methods 
available for the financing of such an enterprise, the capital so invested 
would be peculiarly incapable of conversion into fluid capital. The future 
of forest ownership, to a large extent, depends upon the solution of these 
problems. 40 With this public question, however, the present historical 
study is not directly concerned. 41 

Relation of Log Prices to Lumber Prices. 

Log prices, representing the immediate raw material of lumber manu- 
facture, follow much more closely than do the prices of standing timber, 
the current fluctuations in lumber prices. As has been noted, stumpage 
prices in the United States have tended always to rise. When lumber 
prices have declined many timber owners, especially of the second class, 
as described, have withheld their stumpage, either in whole or in part, 
from immediate use. Strictly defined, such timber cannot be said to then 
have a "price" since it is neither sold nor used. The reserved "price" in 
the mind of the owner, is therefore a valuation based on the anticipated 
prices which he expects to receive. Such "price" is not directly concerned 
with the present prevailing prices of lumber since the current prices do not 
allow a margin for his stumpage equal to the owner's estimate of its 
worth. It is seen therefore that the prices of timber, a raw material of 
rapidly diminishing relative supply, have not always followed the current 
movements of lumber prices during periods of decline. Stumpage prices, 
however, have tended to absorb current increases during periods of rising 
lumber prices. 

Log Prices and Stumpage Prices Compared. Log prices have differed 
from stumpage prices in one essential particular. They are based ulti- 
mately and exclusively upon the current prices of lumber, whether these 

39 I. e., the bulk of the income is derived from the "financially mature crop." 
Under present methods of silviculture there are, of course, frequent intermediate 
thinnings which often yield a considerable return. See Maw, P. T. op. cit, pp. 233- 
235. 

40 See supra, p. 23, esp. note 81. 

41 Compton, Wilson, The Future of Forest Ownership; repr. from A. L., Dec. 
19, 1914, pp. 23, 24. 



74 THE ORGANIZATION OF THE LUMBER INDUSTRY 

be high or low — or rather, perhaps, upon the prices of lumber anticipated 
for the immediate future. The fact that logs have been cut of itself 
indicates that they have been intended for immediate manufacture. Hence 
the prospect of higher distant future lumber prices has had no influence 
upon current log prices. 42 The close parallel of the course of average 
lumber prices to that of log prices indicates that the degree of adjustment 
between them has been very high. The single comparison is made in the 
following diagram 43 of the prices of fir logs in the Puget Sound region 
of the Pacific Northwest. In addition to the close general correspondence, 
the tendency is evident of price movements to appear first in the prices 
of lumber. 

No evidence is observed, in the comparison of these prices, of the 
operation of any substantial artificial influence upon lumber prices, unless 
such influence has affected equally the prices of logs and of lumber. 

42 It may or may not have had an indirect effect in changing the quantity 
of logs to be cut. This has, however, depended upon the policy of the timber 
owner who has cut the logs. 

43 The statistics of log prices are from the following sources : A. L. and 
M. V. L., Tacoma News, Jan., 1904, to June, 1907 ; Apr., 1909, to 1910. The inter- 
vening prices are of actual sales taken from invoices as are also the prices of 
fir lumber for the entire period. 



OWNERSHIP AND PRICES OF STANDING TIMBER 75 




DIAGRAM 9. 

Comparison of Prices of Fir Logs and Fir Lumber. 

(A, base line for log prices; B, base line for lumber prices.) 

Note : The index is referred to base line A. The prices of lumber, on base line 

B must therefore be diminished by 10 dollars, i. e„ the difference between the base lines. 

Legend : Logs, "in the water," Puget Sound mills : 1, Flooring ; 2, Merchantable ; 3, 

No. 2. Lumber, f. o. b. Puget Sound mills: 4, Common dimension, 2"x4"x8-16'; 5, 

Common boards or shiplap, I"x8"xl2-16' ; 6, Clear vertical grain flooring, l"x4" or 

I"x6"xl0-16', No. 3 ; 7, same, No. 2 ; 8, same, No. 1. 



76 THE ORGANIZATION OF THE LUMBER INDUSTRY 



CHAPTER V. 

THE PRICES OF LUMBER. 

Prices, i860 to 1913. 
The range of relative lumber prices as compared with general prices 
in the United States, since the appearance of the early evidences of ex- 
haustion of Lake States timber in 1880 and 1881, has been shown in 
Diagram 1. It has been there indicated that the recent relative increase 
of lumber prices as compared with general prices began, not with the 
period of rising general prices in 1896, but with the period which marked 
the beginning of the shift of lumber manufacture from the Lake region 
to the more distant South, i. e., about 1880. As early at least as 1880, 
therefore, the general behaviour of lumber prices exhibited substantial 
peculiarities. The general causes of these peculiarities it has been the 
purpose of this study to describe. 

It has been obviously impracticable to secure useful price data for 
the early period of local manufacture for local consumption. Grades of 
lumber were then often not distinguished. The growth of the industry, 
moreover, had been continuously but only gradually westward (see Dia- 
gram 5), and the cheap water transportation over the Great Lakes and 
the eastern waterways had not greatly increased the cost of lumber in 
the consuming markets. The succeeding shift, however, to a source 
almost a thousand miles distant, the product of which has had access 
to the markets at a much greater cost per unit, i. e., chiefly by rail trans- 
portation, has given rise to a condition in the industry, of relative exhaus- 
tion of timber, which it had previously experienced to only a small de- 
gree. That marked peculiarities in the course of lumber prices have 
appeared since about 1880, does not therefore imply that such peculiar- 
ities in some degree, or causes tending to produce such peculiarities, had 
no existence before that time. 

The course of relative lumber prices in the United States for fifty- 
four years, 1860 to 1913, is shown in the following diagram : x 

1 Every effort has been made to secure a series of prices as truly repre- 
sentative of the actual market in the United States as is possible in a single 
series. The index here given has been carefully verified by comparison with 
the various market reports in current trade literature. The sources and items 
upon which it has been based are given in detail in Appendix I. Throughout 
this study, except where specified to the contrary, ''lumber prices" refers to this 
series. To be precisely accurate the weighting of the annual average prices of 
the different species should have been constantly altered to conform to the pro- 
portionate current cut of each species. Since continuous data on annual produc- 
tion by species have not been kept this method has been impracticable. The 
distribution of weights has been determined, therefore, with reference to esti- 
mates of production and consumption of lumber, in the files of the Forest Service, 
and based on census figures. See For. Ser. Circ. 166, 1909, p. 18. 



THE PRICES OF LUMBER 



77 




DIAGRAM 10. 

Relative General Lumber Prices in the United States : Quarterly. 

Note : Lower chart is a continuation of upper chart. 



78 THE ORGANIZATION OF THE LUMBER INDUSTRY 

The base selected for this and for all other series of relative prices 
in this study (except where otherwise specified), has been the average 
monthly price for the period 1901 to 1903, inclusive, of all the included 
species of lumber. Its peculiar advantage has been that it divides into 
two almost equal parts the difference between the highest and the lowest 
prices for the period under review. 2 The graphical representation, there- 
fore, of this series produces no substantial visual exaggeration of the 
relative rise or fall of prices for any part of the period. 



General Movement of Prices. 

The lowest price level during the period was in 1860, i. e., 40.5. 
Under the influence largely of a depreciated currency, prices increased 
during the next five years 150 per cent to 101.2 in the first quarter of 1866. 
Thereafter until about the period 1879 to 1881 lumber prices fluctuated 
more or less closely in accord with general prices. The former, however, 
responded more tardily and with greater irregularity to the variations in 
the gold prices of the "greenbacks" than did the average of "all commod- 
ities." The level of prices reached in 1866 (1st quarter), when gold was 
at a premium of nearly 40 per cent 3 was not again attained until 1902 (2nd 
quarter). At no period intervening, however, until 1896, did the general 
level of lumber prices fall below 65. 

The net decline in lumber prices between 1879 and the period of 
lowest prices in 1897 was 2.48. During the same period 4 the decline in 
the level of general prices was 38.1 and of "lumber and building mate- 
rials," 21.5. The courses of annual prices of the three classifications 
named, respectively, are compared in Diagram 11. 

The proportionate rise in general prices, during the Civil War period 
appears exaggerated. For example, between 1862 and 1864, lumber 
prices increased 75.1 per cent and general prices 92.4 per cent. The 
graphical difference, however, appears much more pronounced. The 
curve of lumber prices, after crossing the base line (100) in 1902 has 
remained substantially above that of general prices as it had been con- 
tinuously below it during the entire preceding period. Between 1860 
and the period 1901 to 1903, general commodity prices showed a net 
decline of 26.2 or of 20.8 per cent of the average relative price in 1860. 

2 This does not apply to the war period during which prices were exceedingly 
erratic. 

3 The daily premiums on gold during this quarter fluctuated between 44^$ 
high and 25 low, opening at the former quotation on January 2, and closing at 28^4, 
on March 31. The cumulative effect of the higher prices of gold in 1865, however, 
is more largely reflected in lumber prices for 1866 than in general prices. 

4 General prices have been derived from the Bureau of Labor Statistics 
series for "all commodities," since 1890; for the period 1860 to 1890 from a 
similar series in the Senate (Aldrich) Finance Report of 1893. "Lumber and 
building materials" is a classification used in both of the above named series of 
prices. Although the articles incorporated therein have varied since 1860, the 
Bureau of Labor Statistics has presented the relative prices derived from them 
as reasonably comparable (Bull. 149, 1913, p. 179). This classification in 1913 
consisted of 28 commodities. Of these 10 were of lumber, 2 of shingles, 1 of 
pine doors. The remaining items were of miscellaneous building materials in 
common use. 



THE PRICES OF LUMBER 



79 



1 1 1 1 n 'm 



MMMMiMI i| i 1 1 1 i 




id isl isl lai [j isl id id a id i^i id 



DIAGRAM 11. 
Relative Prices 1860 to 1913: Annual. 



80 THE ORGANIZATION OF THE LUMBER INDUSTRY 

During the same period, however, lumber prices increased 59.5 or 146.9 
per cent of the average price in I860. 5 

Lumber Prices and General Commodity Prices Compared. 

Between 1873 and 1880 lumber prices as compared to general prices 
increased .5 per cent or less than .1 per cent annually. Their move- 
ments for this period were almost identical. Between 1880 and 1897, 
however, there was a net increase in lumber prices as compared to gen- 
eral prices, 6 of 48.7 per cent or of nearly 2.9 per cent annually (cumu- 
lative) ; between 1897 and 1913 of 38.4 per cent or at an annual rate of 
2.4 per cent. It will be observed, however, that between 1897 and 1907 
the rate of annual increase above that of general prices was 4.87; and 
that for the period 1907 to 1913 there has been an average net decline 
of 1.15 per cent annually. Considering, therefore, the relative price of 
all commodities for each successive year as 100, lumber prices as com- 
pared to general prices have risen as follows: 7 

1873 to 1880 at the average rate of .1 per cent annually; 
1880 to 1897 at the average rate of 2.9 per cent annually; 
1897 to 1913 at the average rate of 2.4 per cent annually; 

But 1897 to 1907 at the average rate of 4.87 per cent annually ; and 
1907 to 1913, decreased at the average annual rate of 1.15 per cent. 

Relative Rise Since 1880. 
Therefore, the average relative rise in lumber prices between 1897 
and 1913, as compared with the course of general prices has not only been 
greater than the corresponding rise between 1880 and 1897, but has 
actually been slightly less. 8 The period beginning in 1880 has been sharply 
delineated by the constant divergence thereafter of the course of lumber 
prices from that of general prices. The degree of this divergence (cumu- 
lative) has increased continuously until 1907. Thereafter the direction 
of the net divergence has been reversed ; the average increase in general 

5 General prices, 1860, 126.2 ; lumber prices, 40.5. If the latter had fallen in 
equal direct proportion to the fall in general prices, the relative price of lumber 
for the base period, 1901 to 1903, would have been 32.1 instead of 100. Pro- 
cedure: 126.2-^40.5X100 — 100 = 211.6, i.e., the per cent comparative increase 
of lumber prices over general prices. 

« Lumber prices, 1880, 74.6; 1897, 67.5. 

General prices, 1880, 132.; 1897, 80.3. Procedure : (80.3 h- 132) X 74.6 = 45.4; 
i. e., if lumber prices had fluctuated in the same direction and to the same degree 
as had general prices. But the lumber price for 1897 is 67.5. 67.5-*- 45.4 X 100 = 
148.7. Therefore 148.7 — 100 = 48.7, i.e., the total net increase in lumber prices 
as compared to general prices for the period. 

7 These percentages are the measure of the effect of the price raising in- 
fluences peculiar to lumber, i. e., as distinct from those tending to affect equally 
the prices of all commodities. 

8 From this essential point of view, i. e., of lumber prices in relation to gen- 
eral prices, the assumption that the remarkable rise in lumber prices has been 
only since 1896, 1897 (an assumption which has been in large measure responsible 
for the recent comment on, and investigation of, the lumber industry) is un- 
founded in fact. The fact that there has been an almost uninterrupted relative 
rise, since 1880, in the prices of lumber as compared with the relative prices of 
all commodities, has been confused because of the presence of an absolute decline 
in both. 



THE PRICES OF LUMBER 81 

prices since 1907 has been more rapid than that of lumber prices. The 
net current effect of price influences peculiai to lumber, first substan- 
tially evident in 1880, has therefore been intensified until 1907. Since 
1907 the average net effect has been one of price depression. 

Prices of Building Materials. 
That the phenomena of lumber prices have not been characteristic 
of the prices of building materials generally is shown in Diagram 12. The 
normal movement of the prices of building materials has more nearly 
approximated that of general prices than that of lumber prices. In fact, 
were the items of lumber 9 eliminated from the classification of ''building 
materials" the average prices of the latter would be on a level lower 
than that of general prices. Other things being equal, therefore, the 
relative rise since 1880 in the prices of lumber (as compared to all com- 
modities) has not been due to influences operating upon building mate- 
rials as such. 

The upper division of the following diagram (1873 base year, 100) 
shows the remarkable degree to which, after about the year 1880, lumber 
prices have resisted general price depressing influences. The same phe- 
nomena have been shown in Diagram 1. The lower series indicates the 
rapidity of the recent rise from the point of minimum actual prices in 
1897 (100) and the approximate uniformity of the relation of the prices 
of building materials intermediate between those of lumber and the prices 
of all commodities. During the ten years following 1897, lumber prices 
have increased 114.9 per cent as compared with a coincident increase in 
general prices of 44.6 per cent of the prices for the year 1897, respectively. 
Of the 114.9 per cent increase in lumber prices, 65.7 accrued between 1904 
and 1907 and 41.8 during the single year 1906. 

Price Classification by Species. 
The conditions of the manufacture and distribution of the important 
species of lumber in the three great sources of production have been de- 
scribed above. It remains, therefore, to study the behaviour of the 
prices of individual species manufactured and sold under these condi- 
tions, and to compare them with the general prices of lumber of all 
species. The quarterly average relative prices of eight leading species, 
which contributed 79.2 per cent of the total cut of lumber in 1912, are 
shown in Diagram 13. The general index of lumber prices for this 
period has been derived from these prices of lumber of several individual 
species. 10 The course of prices in terms of percentages of the average 
price, 1901 to 1903, of each species is compared with that of other selected 
species as follows: 

9 See supra, p. 78, note 4. 

10 These prices are representative als(5 of most of the minor species not 
included. Fir prices, for example, fairly typify the course of the prices of western 
pine and of other western softwoods, which together constituted more than 
6 per cent of the lumber manufactured in 1912. Oak prices, also, in a general 
way, well represent the market for the minor hardwoods, which comprised 9 
per cent of the lumber cut in 1912. These minor species, however, have dis- 
tinctively special uses and do not, therefore, proportionately affect the market 
for lumber for its major uses, i. e., for general construction and mill work. 



82 



THE ORGANIZATION OF THE LUMBER INDUSTRY 




I I I I I 



€0\ 



\ 



CO/ — 



I 

V 



\ 



V 



CO 
< 

CD 

CO 



g| §| $] gj g si S) 3 § 




DIAGRAM 12. 
Relative Prices 1873 to 1897 and 1897 to 1913 : Annual. 



THE PRICES OF LUMBER 



83 



TABLE 6. 

Periodical Fluctuations in Lumber Prices. 



1897 


1900, 


1901 


1903, 


1904 


1907, 


1908 


Price 


to 




to 




to 




to 8 


in 


1900 


1901 


1903 


1904 


1907 


1908 


1912 


1897 


+ 


— 


+ 


— 


+ 


— 


+ 




41.8 


25.42 


27.9 


18.7 


74.8 


70.8 


50.8 


61.6 


41.5 


23.4 


27.3 


7.8 4 


54.6 6 


42.9 


35.8 


67.7 


44.7 


21.9 


39.2 


33.4 


70.7 


43.2 


22.7 


54.3 


28.6 


6.9 


23.5 


3.5 


49.5 


17.1 


15.3 


61.1 


45.5 


29.6 


40.4 


5.3 6 


59.4 


46.8 


41. 


58.2 


31.4 


8.7* 


13.9 


2.5 


29.2« 


20.5 


12.7 


67.5 


29. 9 1 


2.1 2 


28.8 


3.3* 


19. I 7 


11. 


2.7 


55. I 1 


17.3 


4.3 


15.8 


2.9 


32.4 


20. 


33. 


80.9 


32.26 


12. 48 3 


23.29 


10.11 


52.84 


38.11 


33.09 


64.52 



Price 
in 8 
1912 



Southern Yellow Pine 
North Carolina Pine. 

Douglas Fir 

White Pine (Northern) 

Hemlock 

Spruce 

Cypress 

Oak 

Lumber 



142. 

152.8 

133.1 

150.5 

162.8 

123. 

119.2 

153. 

145.3 



1 Begins in 1st quarter, 1899. 5 To 1st quarter of 1905. 

2 To 4th quarter of 1900. 6 To 2nd quarter of 1906. 
8 To 3rd quarter of 1900. T To 4th quarter of 1906. 
4 To 4th quarter of 1903. 8 3rd quarter. 

Note: These fluctuations are in terms of percentages of base prices, 1901 to 1903. 
Symbols: + indicates an increase; — a decline. 

Total Supply Compared to Annual Cut. 
In the description of the conditions of the manufacture and distribu- 
tion of lumber in the important historical and present sources of supply 
(See Chapters II and III) may be found the reasons for the variations 
in price behaviour shown in the above table. Of particular importance 
in this connection is the relation of the annual cut of timber to the total 
remaining supply of stumpage : 



TABLE 7. 

Relation of Average Annual Production to Total Supply. 

Total Lumber manufactured, 1909 12 

Timber Supply Per Cent of Total 

Per Cent Per Cent Timber Supply 

United States 100. 100. 1.6 

Pacific Northwest. ..■ 53.5 17.7 .5 

Southern States 17.5 29.7 2.7 

Lake States 3.9 12.3 5. 

All other States 25.1 40.3 2.5 

For example, the rate of consumption of Lake States timber is now 
about ten times as rapid as that at which West Coast timber is being cut. 
An extension of the relation expressed in the third column above, to 

11 It is interesting to note that the lowest price level after 1907 was reached 
during the same (3d) quarter of 1908 by all the species of softwood lumber. 
The minimum price for oak was reached in the 2d quarter. This implies the 
probability that the efficient cause of the decline was nation-wide in its effect 
and that it was removed at about the same time in all regions. 

12 The cut for 1909 was reported by the decennial census. It is therefore 
the most complete recent record available. The geographical distribution of the 
timber supply is that obtaining at the beginning of the year 1911. Only the 
Gulf States and Arkansas are included in the classification of "Southern States." 
The total supply referred to in this table includes both public and privately 
owned timber. 



84 THE ORGANIZATION OF THE LUMBER INDUSTRY 

individual species shown in Diagram 13, indicates the following per- 
centage ratio of annual cut (1910) to the total remaining stand of mer- 
chantable timber: 13 

Southern yellow pine, 3.89 ; Hemlock, 5.2 ; North Carolina pine, 8.01 ; 
Cypress, 2.3; Douglas fir, .9; White (northern) pine, 12.88. 

Interpretation of Price Movements. 
The annual cut of fir is thus less than one per cent of the total stand 
in private holding. The rate of cutting of northern pine, on the other 
hand, is over fourteen times, and that of southern pine nearly five times 
as great as the rate of fir cutting. 

A substantial explanation of the relatively rapid cutting of southern 
and northern pine is a psychological one. The greater the proportional in- 
crease in the price which the owner anticipates, the less likely is he to 
cut his timber. The lower the original price the greater will be the 
proportionate effect of a subsequent increase. When the price is as high 
as has been that of northern pine stumpage in recent years, any pros- 
pective increase, reasonably to be expected, would not be a considerable 
relative increase. As the relative or proportionate increase is the sort 
of increase in price in which the owner is interested, it has become more 
and more to his interest to cut rather than to hold. By this means he 
has evaded the accumulations of carrying charges. The price oi West 
Coast timber, however, until recent years, has been nominal. Propor- 
tional increases have been very large and have tended to induce the 
withholding of timber for future price increments. 

The following paragraphs may facilitate the interpretation of Dia- 
gram 13. 14 

Southern Yellow Pine. 1. 330.9. 2. Relatively scattered; many 
small holdings. 3. Confined chiefly to large mills. 4. Inadequate to 
dominate industry as a whole; members of the associations control less 
than one-third of the annual product. 5. Very efficient in the large mills ; 
inefficient in the class of small mills. 6. Medium -f- to low +. 7. Lov? 
average ; caused largely by extensive bonding of timber. Has resulted at 

13 Includes only timber privately owned. The hemlock and white pine are 
for the Lake States. These figures are more accurately descriptive than are 
those of total supply of both public and private holdings, since the latter have 
not as yet entered prominently into lumber manufacture. 

14 The descriptions of individual species refer to private holdings and are 
based upon statistics dated up to and including the year 1910. Southern yellow 
pine is to be distinguished from North Carolina pine ; the latter denotes the 
yellow pine product of Virginia and the Carolinas. 

Following is the key to the numerical references in the text : 1. Supply of 
standing timber, in billion feet, board measure. 2. Ownership. 3. Organiza- 
tions of manufacturers. 4. Joint action through the associations. 5. Logging 
and manufacturing equipment. 6. Average grade of product. 7. Average finan- 
cial strength. 8. Competition for markets with other species of lumber. For a 
discussion of the comparative response to price influences, of different grades 
within a single species, see infra, pp. 93, 95. 

"In times of depression low-grade lumber is sold at relatively cheaper, and 
in times of prosperity at relatively higher prices than the high-grade lumber." 
The Lumber Industry, Pt. IV, p. 331. 



THE PRICES OF LUMBER 



85 



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10 


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- £ s = g 9 < 

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IPl.k , > , i ; 


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DIAGRAM 13. 
Relative Average Prices of Lumber of Eight Species : Quarterly. 
<N. B. — The difference in the scale for Charts A and B. The two series of prices, 
represented by A and B, are presented in this form so that the price movements of each 
species may be readily compared with those of every other species.) 



86 THE ORGANIZATION OF THE LUMBER INDUSTRY 

times (e. g., in 1907, 1908) in the enforced liquidation of bonded assets, 
at a sacrifice, in order to meet accruing obligations. 8. Fir, northern 
pine, hemlock, North Carolina pine. 

North Carolina Pine. 1. 53.5. 2. Less concentrated than in 
southern yellow pine. 3. Include large and small mills. 4. Inadequate 

5. Average efficiency; use of kiln-drying method facilitates ready re- 
sponse to changes in current conditions of lumber supply. 6. Medium to 
low. 7. Average. 8. Chiefly with yellow pine in eastern markets; 
spruce. 

Douglas Fir. 1. 521.9. 2. Concentrated (typically). 3. See 
supra, pp. 52fT. 4. Ibidem. 5. The most efficient in the industry. 

6. High to medium. 7. The typical large holdings are financially 
secure. Many mills, however, have assumed bonded obligations similar 
to those of the southern pine manufacturers. In times of relatively 
low prices (e. g., 1907, 1908) the enforced increase in output, by a 
class of mills, in order to meet current obligations, has tended to still 
further depress the market by a relative overstocking. 15 8. Southern 
pine, northern pine and hemlock in mid-western markets; other West 
Coast softwoods. 

Northern Pine. 1. 17.7. 2. Recently the remaining timber has 
been concentrated into few hands; formerly holding was scattered. 3. 
Include mills cutting nearly one-half of the annual product. 4. Adequate 
to dominate the industry 16 in its principal manufacturing region (Minne- 
sota) where the membership' controls nearly 90 per cent of the average 
current cut. 5. Very efficient in the case of mills having reasonably 
large supply of timber in reserve. Where the stumpage has been nearly 
exhausted the maintenance of completely modernized equipment has not 
been justified by the prospect for continued operation. 6. Medium + 
to low — . 7. Very secure. 8. Hemlock, yellow pine and West Coast 
lumber in the medium and low grades. The small amount of high grade 
white pine experiences, practically, only the potential competition of other 
species, which become actually competitive only when the white pine 
prices have exceeded a maximum limit. 

Hemlock. 1. 26.6. Hemlock (Lake States) has appropriated a 
large share of the market, since about the year 1900, relinquished by 
northern pine. It has almost the same geographical distribution as has 

15 The chief effect of the panic and depression of 1907 and 1908 upon the 
prices of fir and of other western lumber, was indirect. The extremely low price 
of yellow pine enabled it to so far invade the fir market in the Middle West that 
the demand for the latter, especially in the medium grades, was greatly curtailed. 
The effects of the panic operated upon the West Coast lumber industry mainly 
through its influence in depressing the demand in the central and the mid-western 
markets. 

16 The influence of the present association, organized in 1908, distinct from 
the influence of the individual manufacturers, is difficult to determine. For many 
years the strategic position of the white pine producer has enabled him, because 
of the exhaustion of the timber, and entirely independent of any organized asso- 
ciation activity, to secure maximum prices limited only by the competition of 
certain other species at lower prices. This limitation has continued to operate. 
Whatever specific effect may be attributable to joint activity has been reflected 
rather in a greater degree of uniformity of prices than in higher prices. 



THE PRICES OF LUMBER 87 

northern pine and therefore equal accessibility to the markets. To its 
consequent strategic position, therefore, has been due, in large measure, 
the conspicuous increase in hemlock prices during the period covered by 
Diagram 13. An almost continuous car shortage, during 1906, 1907, 
greatly impeded the transportation of southern pine to northern markets. 
A substantial part of the demand was therefore diverted temporarily to 
hemlock. During the depression, following the panic, however, a decline 
in transportation activity ended the car shortage. Yellow pine lumber 
was thus enabled to reach the Wisconsin markets w r ithin three weeks. 
The prices of hemlock then sharply declined. 

Moreover, the fact that at the current rate of cutting, there remained 
less than twenty years' supply (from 1910), tended to counteract the 
effect of the considerable degree of dissipation of the ownership of the 
standing timber and also the influence of the relative lack of financial 
strength among the hemlock manufacturers. The largest association 
represents less than one-sixth of the average annual cut. 

Cypress. Because of the inaccessibility of the swampy southern 
cypress lands and the consequent high logging cost, cypress lumber was 
long unable to compete with species more favorably located. With the 
rise in general lumber prices, however, after 1897, the potential cypress 
market was greatly expanded. 17 Thus within three years after 1899 (1st 
quarter) the price of cypress lumber had increased from 55.1 to 100.1 
and in 1903, to 111.7 (2d quarter) or more than double. The great 
increase in cypress prices thus occurred before the base years, 1901 to 
1903. Having taken up most of the slack afforded, the competition of 
other species has limited the subsequent rise in cypress prices to com- 
paratively narrow margins. 18 The exceptional financial security of the 
Louisiana red cypress manufacturers has been reflected in the relatively 
small decline in prices during periods of general decline in the prices of 
all species. Although the annual cut is only two and three-tenths per 
cent of the total supply of 40.4 billion feet in the United States, the rate 
of cutting in Louisiana, which contributes nearly two-thirds of the annual 
cypress product, is 3.9 per cent of the remaining supply of 15.7 billion 
feet. 

Effect of Financial Strength of Holding. 
Those species of which almost the entire remaining supply has been 
securely held, 19 have shown a distinct capability of resisting price de- 
pressing influences. West Coast timber is typically in large strong 
holdings. Of this great supply a relatively small proportion — in the 

17 Because of peculiar physical properties cypress has proven an especially 
suitable substitute for white pine. The rapidly increasing scarcity of the latter 
therefore has caused the diversion of much of its former market, in certain 
territory, to cypress lumber, especially of high quality. Because of the lack of 
physical qualifications, hemlock, although more favorably situated geographically, 
could not have met this demand. 

18 The cypress manufacturers initiated a vigorous advertising campaign, about 
the years 1897-1898, which has been in a measure, at least, responsible for the 
acquisition of new markets and for the sudden subsequent increase in demand. 

19 Northern pine, cypress and spruce. Undoubtedly oak also falls within this 
group, although precise data on its ownership are not available. 



88 THE ORGANIZATION OF THE LUMBER INDUSTRY 

absolute, however, a large amount — has been held subject to current 
manufacture for the purpose of meeting the carrying charges and for 
immediate profits. This factor has tended to aggravate the price de- 
pressing influences by causing a relative over-supply during periods of 
slow demand. Thus, also, southern yellow pine and Lake States hemlock, 
which are, on the average, weakly held, have been incapable of resisting 
the forces leading to a general decline in lumber prices. 20 

There has been, however, no observable historical connection between 
strong timber holding and high prices for lumber. In fact, the most 
conspicuous increases have been in the prices of species weakly held, e. g., 
southern yellow pine and hemlock. Cypress, spruce and oak, on the other 
hand, have shown smaller relative increases during the periods of general 
prosperity, especially during the period, 1904 to 1907. If then there 
have been an intimate connection between strong holding of timber and 
the organized activity of associations of lumber manufacturers, such 
connection cannot be said to have extended to the power of raising prices 
to a substantially higher level than has been reached by other species of 
lumber in the absence of such activity under a condition of untrammeled 
competition. 

Nor can it be shown, from the figures above presented, that the prices 
of the species strongly held had, before the base period (1901 to 1903), 
appropriated the entire slack permitted by the competition of other species 
(as distinguished from the competition of lumber of the same species 
manufactured at other mills, i. e. as distinguished from competition within 
the species). For, the rise, between 1897 and 1900, in the prices of 
lumber of such species was no greater than — if, indeed, as great as — the 
rise in the prices of other species financially less secure. 

Relation of Supply to Price. 
A noticeable characteristic of the prices of lumber has been their 
sensitiveness to changes in the amount offered on the market, i. e., in the 
effective supply. Conversely the supply of all species, of some more 
rapidly than of others, has responded readily to the stimulus of higher 
prices. When prices have sharply fallen, however, the supply has less 
readily accommodated itself to the decline in the demand. This distinc- 
tion has been due to three main factors: 

First, the normal total sawmill capacity of the United States has 
greatly exceeded the volume of production needed to satisfy the average 
current demand for lumber. 21 

Second, the maintenance of a substantial "y^d stock" has enabled 
the manufacturer to meet sudden demands. The use in many regions of 
the kiln-drying method — enabling the mill to ship dry lumber in a few 
days "from the stump," as compared to nine months often required by the 
air-drying process — has intensified the readiness of response to increases 
in current demand. 



20 Southern yellow pine, during five quarters, 1907-1908, lost 70.8 of its gain 
of 74.8 during the preceding three years. Hemlock lost 46.8 of a similar gain 
of 59.4. 

21 Spec. Rep. on Lum. and Shing. Ind:, 1914, p. 42. 



THE PRICES OF LUMBER 89 

Third, on the other hand, a large proportion of the mills in important 
lumber manufacturing regions have either voluntarily, or under financial 
pressure, continued to manufacture regardless of the current price con- 
ditions. Continued curtailment of production has been practicable only 
to those mills which have been capable of absorbing carrying charges. 22 

By disseminating among its clientele information on market condi- 
tions, the lumber trade journals have greatly increased the ability of the 
lumber manufacturers and dealers to intelligently appraise their own 
stock. This function has been, to a considerable extent, as has been 
observed, 23 absorbed and supplemented by the manufacturers' associations. 
Members have been often furnished with daily (or weekly) strategic 
reports on demand, supply and prices. The most comprehensive of such 
compilations have been those of the Yellow Pine Manufacturers' Asso- 
ciation, and of its predecessors, since 1904. The following diagram of 
monthly cut and shipment compared with changes in the current supply 
and in the course of prices of yellow pine lumber is based upon these 
association statistics. 24 The reaction is shown of supply to changes in 
price and of price to changes in supply. In general the readjustment 
has been prompt. 



Actual and Quoted Prices Compared. 

In their response to changes in supply, prices as quoted in the reports 
of the associations, have shown a great lack of uniformity. From this 
fact unwarranted conclusions have often been drawn as to the nature of 
lumber prices. Generalizations founded, however, upon prices which, 
on the average, have been merely asking prices, have not reflected the 
actual market. This is obviously represented only by the weighted average 
of the prices at which actual sales have been made. Far therefore from 
proving an exception to the validity of the price equation, such apparent 
phenomena show only the inaccuracy of the so-called "prices" taken. 25 

Prices quoted in association or in manufacturers' lists have re- 
corded, 2 * as a rule, the extremes neither of rising nor of falling prices. 
Yet it has been such extremes especially which have shown the adjust- 
ment of prices to supply. On a scale exaggerated to indicate the degree 
of this adjustment, Diagram 15 represents the response of yellow pine 
actual prices to varying conditions of supply during a period, 1910 to 

22 E. g., although the total production during the period of panic and depression 
after 1907 was greatly reduced, the proportionate reduction fell much short of the 
proportionate decline in total demand for lumber. For. Prod., 1911, p. 2. The 
demand for lumber in the great central markets during the early months of 
1908 has been estimated at only 40 per cent of the demand during the correspond- 
ing months of 1907. A. L., Jan. 9, 1909, p. 34. 

28 See supra, pp. 55, 56. 

24 The annual production of the mills for which these compilations have been 
made was estimated in the "Report of Yellow Pine Clearing House" for Septem- 
ber, 1914, at 10,495,375.000 feet. The data are, therefore, without question, rep- 
resentative of the southern pine belt. 

25 A. L., May 25, 1907, p. 5. 
M See supra, p. 19, Diagram 3. 



90 THE ORGANIZATION OF THE LUMBER INDUSTRY 



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DIAGRAM 14. 
Price Movements in Relation to Changes in the Supply of Lumber. 
(N. B. — It is a mere coincidence that the price for January, 1902, is 100, i. e„ 
same as the average price for the base period, 1901 to 1903.) 



the 



THE PRICES OF LUMBER 91 

1913, of comparatively stable prices. 27 The manufacturers' list prices 
show a much less precise adjustment to changes in the market conditions 
and frequently a wide divergence from the course of actual prices. 

White or Northern Pine. 
Between 1880 and 1897 the average relative price of white pine 
lumber increased from 59.1 to 61. 1. 28 During the same period, general 
lumber prices in the United States declined from 74.6 to 64.52. The 
degree of exhaustion of timber supply in northern pine forests has been 
the peculiar characteristic which has differentiated white pine supply from 
that of other softwood species. A net increase of more than three per 
cent during a period in which general prices 29 (of all commodities) de- 
clined 39.2 per cent, is in general a measure of the influence of the rela- 
tive exhaustion of the supply of white pine timber. 

For the period of ten years, 1897 to 1907, the relative rise of white 
pine prices was less radical but much more uniform than the rise in the 
prices of West Coast and of southern lumber. The smallness of the 
reserve timber supply had enabled white pine lumber, during the pre- 
ceding period, to appropriate much of the slack permitted to it by the 
increasing competition of lumber from other sources. That is, the com- 
petition met by the white pine manufacturers, during this period (1897 
to 1907) was chiefly from other species of lumber and from substitutes. 
Competition among white pine producers themselves had greatly de- 
clined because the normal demand for white pine lumber was capable of 
absorbing the entire output of all the mills. White pine was, therefore, 
before the base years, 1901 to 1903, on a higher relative price level than 
were the competing species, in the manufacture of which similar condi- 
tions of depleted supply of raw material were as yet much less acute. 
The subsequent increases in the prices of white pine lumber, as shown 
in Diagram 13, are therefore based upon a high base price. Although 
the actual increases, in dollars, have been as great or greater than those of 
the prices of other species, the relative increases have been less pronounced. 

Northern pine prices have been more uniform than those of any 
other softwood (see supra, p. 83, Table 6). The knowledge that white 
pine has acquired a substantial "scarcity value" has enabled the manu- 
facturers, without sacrificing their markets, to decline to sell at prices 
much lower than the maximum fixed by the competition of other species 
and above which the demand would have been substantially diverted to 
substitutes. They have long had the assurance that any proportion of 
the supply of lumber which they withdraw from the market will not 
be compensated by an increased output by other white pine mills. In 
other words, there has existed, generallv speaking, in a constantly in- 
creasing degree, a lack of that surplus mill capacity which has become 
so characteristic of the manufacture, for example, of West Coast lumber. 



27 Since 1910 general lumber prices have not risen substantially but have 
fluctuated between wide margins. At present (January, 1916) there has been a 
general substantial increase in lumber prices throughout the United States after 
almost two years of continual depression in the industry. 

28 This was the lowest price for white pine in the year 1897. See Appendix 
I for items and sources upon which this computation is based. 

29 Bull. 149, Dept. of Labor Stat., p. 179. 



92 



THE ORGANIZATION OF THE LUMBER INDUSTRY 





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DIAGRAM 15. 
Relation of Actual Sale Prices and List Prices to the Supply of Southern Y*llow 

Pine Lumber. 
(N. B. — Price scale refers to series of relative prices based on the average pricw 
for the period, 1901 to 1903.) 



THE PRICES OF LUMBER 93 

There has been no surplus mill capacity because there has been, compar- 
atively speaking, no surplus white -pine timber. 30 

Relation of Grade to Price. 
The average relative prices of low grade lumber at the mill have 
normally risen higher and fallen lower than have those of the higher 
grades. 31 This fact is attributable in part to the principle upon which 
lumber freight tariffs have been fixed in the United States. These have 
been commodity tariffs making no discrimination between shipments of 
high grade or high priced lumber and of low grade or low priced lumber. 
The wholesale price at destination has been, therefore, the f. o. b. mill 
price plus the transportation costs, i. e., the "delivered price." The rail 
transportation costs, per unit, from any given source of supply, have 
been, since 1894, relatively constant. 32 Any increase in the price for lum- 
ber paid in the consuming markets, in excess of the mill price plus trans- 
portation costs, constitutes the margin which both the distributor and 
the manufacturer have sought to appropriate. That part which has been 
appropriated by the manufacturer has been at once added to the mill 
price of future shipments. But since the transportation cost per unit 
weight for all grades has been a constant, such an addition, which is a 
certain proportion of the price in the consuming market, is a still larger 
proportion of the price at the mill and a larger proportion of the mill 
price of low grade than of high grade lumber, 33 

Relation of Transportation Costs to Prices. 

For the same reason, average mill prices of species, which have 

reached the market at the highest costs for transportation, have shown 

more radical relative advances and declines, other things being equal, 

than have the prices of species located near to the consuming centers. 3 * 

80 See supra, pp. 83, 84. On the other hand it must be remembered that when 
timber is already scarce and its price high the probable proportionate future in- 
crease in price will often not justify the withholding of timber from the saw, 
the holder meanwhile paying the carrying charges. The balances of these two 
considerations have apparently determined the recent policy of the northern pine 
manufacturers. The same situation will undoubtedly confront the owners of other 
species as such species, in the future, become exhausted to a constantly increasing 
degree. 

31 E. g., fir, common dimension lumber 2"x4"x8 — 16', f. o. b. Puget Sound in- 
creased in price from $3.75 in 1897 to $13.00 in 1907 and fell to $7.00 in 1908. Fir 
No. 1 clear v. g. flooring prices for the same dates, and basing point were $12.00. 
$27.00, and $23.50 respectively. 

"See supra, pp. 16, 17. 

88 A Puget Sound mill ships 1,000 feet each of low grade and high grade fir, — 
mill prices 10. dollars and 20. dollars respectively. If the rate applying be 50 cents 
per 100 pounds and the weight of each shipment be 2,000 pounds, the delivered 
prices are 20. dollars and 30. dollars respectively. If the prices in the market in- 
crease 10 per cent the prices will be 22 dollars and 33 dollars respectively. Assum- 
ing that the manufacturer is able to appropriate one-half of these increases or 
1. dollar and 1.50 dollars respectively, the mill prices will thereupon become 11. and 
21.50 dollars. The relative increase in the price of the low grade item will have 
been 10 per cent ; in that of the high grade item, 7.5 per cent. 

34 E. g., fir and yellow pine as compared with spruce and oak, the latter being 
very close to their consuming markets. See Diagram 13. It will be correctly ob- 
served that the course of mill prices tends to exaggerate somewhat the fluctuations 
of wholesale prices in the markets most distant from the sources of supply. Mill 



94 THE ORGANIZATION OF THE LUMBER INDUSTRY 



\%n I m I iioo I hoi \m\ H03 \m \ ms\ not |/i 



to 



50 



< No. I Common 

2 ; i i i i i No.l Common 

o No3 Common 

lj No. f Common 

c . . . Average-Northern Pine: 

SCALE 




SCALE' IN BILLION FEET 



V 



DIAGRAM 16. 
Relative Price Movements of Different Grades of Northern Pine. 



THE PRICES OF LUMBER 95 

The species originating at the greatest distances from consuming terri- 
tory offer a parallelism to the low grade or low priced lumber ; the near-by 
species to the high grade or high priced lumber. This phenomenon has 
been a direct consequence of the relative exhaustion of supply near at 
hand. In the accompanying diagram are compared the price movements, 
respectively, of Nos. 1, 2, 3 and 4, common northern pine boards, f. o. b. 
Minneapolis, for the period 1897 to 1907. 



Price Differential Between Markets. 

The more or less wide general range of prices for the same item 
of the same species in the same (large) market has been described (see 
Diagram 3). There has been also a substantial approximation to a con- 
stant differential between the prices for the same item in different markets. 
The degree of uniformity has varied with different species and with dif- 
ferent markets. Mill prices which represent the net average of the local 
conditions in all the tributary markets, are therefore more typical of the 
species than are prices for a single market, unless indeed such market 
be itself a basing point for the distribution of lumber. 

The uniformity of the differential between markets has not been 
noticeably greater in the case of a high priced, relatively non-competitive 
item (quartered oak), than in the case of one that is low priced and com- 
petitive (northern pine dimension). The prices of quartered oak during 
the period 1897 to 1910 have exhibited a comparatively constant differen- 
tial between the large eastern markets ; 35 a less uniform one between these 
markets and St. Louis and Chicago, the latter having been, in a large 
measure, basing points for the distribution of hardwood lumber. Dia- 
gram 17 shows the intermarket relations between the prices of quartered 
white oak, firsts and seconds, 1 inch rough boards and of northern pine 
2 by 4 inch dimension. The base line of the former represents the cur- 
rent prices in the St. Louis hardwood market; of the latter the prices 
in Western Wisconsin. 36 



The Normal Differential. 

If allowance be made for the periodical abnormal conditions in the 
St. Louis oak market, it is seen that the differential has been reasonably 



prices are, however, because of their comparability and because they represent 
average conditions in a wide range of markets and not those in a single market, 
to the best interest of the present study. They best represent, moreover, the actual 
effect of the diminution of timber supply convenient to the markets, which has 
been a factor of controlling importance, historically, in the fixation of the prices 
of lumber. In any case the margin of possible error is not a substantial one, as 
will be seen, for example, by a comparison of the price curves of four grades of 
northern pine in Diagram 16. 

35 Boston, New York, Philadelphia and Buffalo. 

36 Since the price (St. Louis) of quartered oak has been about four times the 
price of northern pine dimension (Western Wisconsin) the scale of differences 
used in the upper chart is four times that of the lower. The relative fluctuations 
are therefore comparable as shown in the respective curves. The lower marginal 
inserts to each chart are, respectively, the January prices in dollars for northern 
pine in Western Wisconsin (upper) and the current semi-annual prices of quar- 
tered oak in St. Louis (lower). 



96 THE ORGANIZATION OF THE LUMBER INDUSTRY 




DIAGRAM 17. 
The Price Differential Between Markets. 
(Items A and B, quartered white oak rough boards, firsts and seconds, 1"; C, 
northern pine dimension, 2"x4"xl2-16\) 



THE PRICES OF LUMBER 97 

uniform. 37 In theory the differential between markets, other things being 
equal, is normally the difference in the respective transportation costs 
from the sources of lumber supply. This difference, in fact, however, 
has been always modified (i. e., either increased or diminished) by a 
factor which is itself the measure of the normal competition of each 
species with all other species and with substitutes for lumber, in the same 
market. For example, the price for which, for many years, Douglas fir 
lumber was sold to distributors in Minneapolis, was about two dollars 
less than the sum of the price of the same item as sold in Portland by 
Portland mills, plus the cost of transportation to Minneapolis. That is, 
the Portland price for Minneapolis shipments was two dollars less than 
the Portland price for domestic consumption. In Portland, West Coast 
lumber had experienced almost no competition. In Minneapolis it met 
with keen competition from northern pine and hemlock and the potential 
competition of southern pine. 



37 As shown in the lower chart, oak prices in St. Louis as compared to the 
other markets, were abnormally high during the latter months of 1898 and the 
first months of 1899; also in 1902 and 1903 and generally during the period, 1907 
to 1909. For eight months ending in May, 1899, the mills supplying the St. Louis 
market had been handicapped severely by continued bad weather. This condi- 
tion resulted in a scarcity of logs and compelled the shutting down of many mills. 
The condition of temporary scarcity of oak lumber was reflected in the St. Louis 
market. Consequently St. Louis prices had practically reached, in May, 1899, the 
high point which was not attained in the other markets until early in 1900. (N. O. 
L. T. J., 1899, Feb. 1, p. 23; 15, p. 19; Mar. 1, p. 23; 15, p. 24; Apr. 1, p. 20; May 
15, p. 21; June 1, p. 21; Sept. 1, p. 20.) Although during the third quarter of 
1901 St. Louis quartered oak prices temporarily declined (A. L., 1901, July 20, 
p. 40; Aug. 10, p. 39; 24, p. 38) because of a diversion of demand to plain sawed 
oak, the closing prices showed a net increase which was not characteristic of other 
markets. See supra, Diagram 13, p. .. V9. (A. L., Sept. 21, p. 37; Oct. 5, p. 37; 
26, p. 40; Dec. 14, p. 44; 28, p. 40.) During most of the years 1902 and 1903 
there was a continued scarcity of quartered oak in St. Louis and in its tributary 
sources of supply. As a result of these local conditions the St. Louis prices, in 
August, 1903, reached a point 5 per cent higher than the highest prices during 
1907. This abnormal condition of course greatly decreased the differential be- 
tween the prices in St. Louis and in other markets. (A. L., 1902, Feb. 8, p. 47; 
Mar. 8, p. 59; 29, p. 48; May 10, p. 48; June 14, p. 54; Nov. 1, p. 77; 29, p. 53; 
Dec. 27, p. 48; same, 1903, Jan. 3, p. 56: increase in price of 36.4 per cent in one 
year; Feb. 2, p. 52; 28, p. 56; Mar. 7, p. 52; esp. Apr. 15, p. 64; Oct. 31, p. 59; 
Dec. 26, p. 66; N. O. L. T. J., 1904, Jan. 1, p. 32.) Because of the great rise in 
prices during this period an increased supply was eventually called out while the 
demand was being diverted in part, to quartered red oak or to plain white or 
red oak. Consequently the rise in prices during the period, 1904 to 1907, so pro- 
nounced in the general lumber market throughout the United States, was much less 
conspicuous in the St. Louis market. Nor was the decline in prices after the 
panic of 1907 as pronounced as in the eastern markets where the depression was 
more acute. (See supra, Chapter I, p. 14.) Within two years after the panic 
St. Louis prices were more than 6 per cent higher than they had been in 1907 
while in the eastern markets the recovery had been much less rapid. (M. V. L., 
1907, Sept. 3, p. 78: "easy to secure asking prices;" Nov. 1, p. 34; 15, p. 40; A. L., 
Jan. 25, p. 93; M. V. L, May 15, p. 41; Sept. 18, p. 40; St. L. L, Dec. 1, p. 80; 
1909, St. L. L., Feb. 15, p. Ill; Apr. 1, p. 95; May 15: quartered white oak very 
scarce and high in price; N. O. L. T. J., Dec. 1, p. 33.) Allowing for differences 
due to local conditions of manufacture and distribution, the diagram indicates a 
close approximation to a constant differential. 

In the tracing of the course of oak prices in a single market a principle is 
illustrated which has been characteristic of all the markets for lumber in the 
United States, in a greater or less degree. This is the slowness with which 
normal competitive conditions, once considerably disturbed, have reasserted them- 



98 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Influence of Competition From Other Species. 
If the West Coast mills therefore wished to ship fir lumber to 
Minneapolis they were compelled, by competition, to do so at an f. o. b. 
mill price, two dollars lower than the price which they received in Port- 
land for similar items of lumber for local use. Consequently they prac- 
tised a two-price policy, 38 a higher price on domestic sales and a lower 
on sales to territory where the competition was more acute. The factor 
which measured the difference in the normal competition of other species 
with fir in the two markets was (about) two dollars. The same principle 
has been equally operative as respects other species and other markets. 
It is not true that the normal difference in price for the same item as 
between different markets has been the difference in the costs of trans- 
portation. This would have been true only in case the condition, other 
tilings being equal, had been realized. But other things have not been 
equal. There have been great differences in different markets in the 
intensity of the competition between one species and other species and 
between lumber and substitutes for lumber. The normal difference 
therefore has been the net difference in transportation costs as modified 
by the normal competitive factor. This factor itself has varied from 
market to market and from period to period, as the geographical relation 
of the lumber producing regions to the consuming markets has gradually 
shifted. 39 

Relation of Building Activity to General Lumber Prices. 
More than forty per cent of the annual lumber output now goes 
direct from the sawmill into general building and construction. Thirty 
per cent is consumed in the form of planing mill products, i. e., flooring 
and finishing lumber, sashes, doors and blinds, etc. Ten per cent enters 
into the manufacture of boxes and crates and three per cent into car 
construction. 40 Four classes of uses therefore have absorbed more than 
four-fifths of the total product of lumber, including nearly all of the 
product of softwood. 41 Rough and dressed lumber used in general build- 
ing and construction, and planing mill products have constituted more than 
eighty per cent of the lumber of these four classifications. Planing mill 
products moreover have been closely associated with the use of general 
building materials of all kinds. The condition of the lumber market 
therefore has been directly affected by changes in building activity. 



selves. In this principle lies the secret of the success of a number of concerted 
efforts by association, in temporarily raising prices in certain limited territory. 

38 Fir export prices have been, since 1897, normally higher than the prices at 
the same mills for domestic rail shipments. For example, the export prices of 
rough common fir lumber in 1902 were 48.4 per cent and in 1907, 21.4 per cent 
higher, as reported by the associations of West Coast manufacturers, than were 
the mill prices of eastern rail shipments. The average difference, however, has 
been much less. Proceedings of Pac. Coast Lum. Man. Assn. Meeting, 1910; in 
A. L., Feb. 5, p. 67. 

39 See supra, pp. 21, 22; also Diagram 8, p. 35. 

40 The 1909 percentages for the four classes of uses here enumerated were 
42, 33, 10 and 2.8, respectively; total, 87.8. _ 

41 The remaining classifications comprise the factory uses of lumber, chiefly 
hardwood, or 17 per cent of the annual cut. During the year 1909, on which 
these figures are based, hardwoods constituted 23.1 per cent of the lumber output; 
during 1912, 22 per cent. For. Prod., No. 2, 1909, p. 11; 1912, p. 10. 



THE PRICES OF LUMBER 99 



Even where other building materials have been used, great quantities 
of lumber have been required for finishing, and during construction for 
scaffolding, and for other purposes. The relation of building activity and 
lumber prices to current industrial and financial conditions has been in- 
terpreted by Brookmire : 42 

"When the bankers have plenty of money they advise the di- 
rectors of Railroads and Industrial Corporations to go ahead with 
improvements and construction work. Immediately there is a big 
increase in steel orders and building permits, as in 1902, 1905, 1909 
and 1912. Then follows a general upward movement in steel, cement 
and lumber prices. [See Diagram 13.] When money gets tight, 
however, the bankers are compelled to curtail loans, and liquidation 
has got to come, as in 1903, 1907 and 1913." 

Lumber, like steel, has been a sensitive barometer of conditions of 
prosperity or of depression. To these it has responded with rapidity. 

Credit Conditions in Relation to Building Enterprise. 
The prostration of credit, imposing a check upon all forms of busi- 
ness activity, has been an especially effective check to those extensive 
building operations which have required bond issues. Purchases of 
lumber by the railroads and by many wood-using factories have, under 
such conditions, been reduced to a minimum. Improvements and exten- 
sions, however, to such manufacturing plants as have been least handi- 
capped by the collapse of credit, and buildings erected by private enterprise 
can be financed without resort to the credit markets. These tend to 
maintain a large volume of building, being greatly stimulated by the low 
prices of building materials during the depression. 

Furthermore, the industrial and financial conditions caused by a 
depression are favorable to an increase in building activity. Abundant 
labor, cheap lumber and other materials, low interest rates — these factors 
tend to make the building depression and the low prices for lumber 
self-corrective. For example, the low lumber prices of 1908, cheaper 
labor and easy money led to a great building "boom" in the latter part 
of 1908 and throughout 1909. 43 That general lumber prices have, despite 
the great building activity since 1909, so slowly recovered from the 
decline experienced during 1907-1908 is presumptive evidence either 

First, that the "boom" lumber prices of 1904 to 1907 were ficti- 
tious 44 or 

Second, that, since 1907, the increased use of substitutes for lumber 
has deprived the lumber market of a substantial portion of its accus- 
tomed share of the demand for building materials, incident to building 
prosperity. 

42 The Brookmire Economic Service, p. 1001. 

43 Building operations in 1909 were the most extensive on record. See The 
Brookmire Economic Service, p. 1001. 

44 This alternative bears directly upon the question as to whether artificial 
influences due to concerted action by associations of lumber manufacturers were 
responsible for the high prices during this period. » 



100 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Although the extent of building for each year since 1908 has been 
greater than that for any preceding year, the prices of lumber have 
made a net regain (1914) of less than two-thirds of the loss during the 
depression of 1907-1908. 45 

Effect of Building Activity on Prices of Dimension Lumber. 
Not only has two by four dimension stock been used strictly for 
building purposes but it has also been the most universally used item of 
lumber in construction. Although the courses of the prices of dimension 
have differed slightly — but unessentially — from the average prices for 
lumber of each respective species, they are properly comparable in the 
following diagram with the fluctuations in building activity. 

Reaction of Lumber Prices to Building Prosperity before 1907. 
To determine the causes of the slow regain by lumber prices since 
1908, of their former level, it has been necessary to examine the be- 
havior of such prices after similar preceding depressions. After the 
panic of 1873, for example, building greatly declined in New York 
City. A drop in 1874 of 33 per cent 46 was followed by an advance of 
less than 10 per cent in 1875 ; a decline of 14 per cent in 1876 ; a still 
further decline of 10 per cent in 1877 and an increase of 6 per cent in 
1878. Not until 1881 did the amount of building in New York City 
equal that of eight years before. Meanwhile lumber prices had dropped 
about 25 per cent, reaching a minimum during the period of minimum 
building activity. 

In 1888 there was again a conspicuous decline in building. This 
was more than recovered during 1889 and 1890. Lumber prices in New 
York 47 as compared with general commodity prices, declined 5 per cent 
in 1888. This decline was regained in 1889. During the year of the 
panic of 1893 there occurred a 15 per cent decline in building and a 6 
per cent decline in lumber prices. The year 1895, however, marked 
the high point in building up to that time. Lumber prices, as compared 
to general prices, also increased. (See supra, Diagram 1.) Similarly, 
the great increase in building in New York City during 1899 was accom- 
panied by a 10 per cent increase in lumber prices. In 1900 there was 
a sharp decline in building and a rapid recovery in 1901. There was 
also a substantial coincident drop in the prices of lumber and an equally 
rapid recovery. From 1908 to 1909 building in New York City increased 
from 95.5 million dollars to 144.3 million, and in 1910 to 108.6 million. 
New York lumber prices, however, increased only 2 per cent in 1909 
as compared with the average for the year 1908, and less than 3 per 
cent in 1910. During this period, as compared with general prices, there 
was a net decline as contrasted with an almost uniform positive increase 
during the similar periods preceding. 

45 See supra, Diagrams 10, 13, 18. 

46 Percentages are in terms of the figures for the immediately preceding year. 
These data have been taken from the files of the "Building Age," esp., Vol. XXXIII, 
1911, p. 474 ff; also "Carpentry and Building," Vol. I, 1879. 

47 "New York is by far the largest consumer of building materials and build- 
ing labor in the United States." Clay- Working Industries, Bull, of U. S. Geolog- 
ical Survey, 1909, p. 502. 



THE PRICES OF LUMBER 



101 




DIAGRAM 18. 
Relation of Building Activity to Monthly Relative Prices of Dimension Lumber : 2"x4' 



102 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Lumber Price Phenomena since 1907. 

The buildings erected in sixty-six identical representative cities of 
the United States 48 during each year since 1908 have exceeded in value 
those constructed during any preceding year. The annual production 
of lumber has probably not increased — if it has increased at all — as rap- 
idly as during the preceding decade. While the annual output of lum- 
ber, since 1909, has remained approximately constant, the value of the 
buildings annually erected has slightly declined. The decline would be, 
doubtless, even more apparent were the building statistics discounted 
in proportion to the increase, during the period, in the value of buildings 
of identical construction. 

Accurate and complete comparison of lumber output with the demand 
for building is, however, impossible. The annual production of lumber 
reported by the Census Bureau through the Forest Service has been, 49 
in billions of feet board measure : 



1899....... 


35. 


1909 


44.5 


1904 


34.1 


1910 


40. 


1906 


37.5 


1911 


37. 


1907 


....... 40.2 - 


1912 

1913 


39.1 


1908 


33.2 


38.4 



The statistics for 1909 are conspicuously incomparable with those 
for other years not collected by the agencies of the decennial census. 50 
The following record of building activity (in millions of dollars) in 
sixty-six cities should be considered in connection with the annual pro- 
duction of lumber and the movements of lumber prices in the United 
States as given in Appendix II: 





First 


Second 






6 Months 


6 Months 


Year 


1905 


296.2 


302.4 


598.7 


1906 


348.9 


279.4 


628.3 


1907 


318.6 


242.3 


561. 


1908 


224.5 


289.7 


514.2 


1909 


385.5 


344.1 


729.6 


1910 


354.9 


312.4 


667.4 


1911 


320.9 


322.1 


643.1 


1912 


350.2 


330.3 


680.5 



The slow recovery of lumber prices since 1908 has been due in part 
to the influences tending to encourage caution and conservatism in enter- 
prise throughout the United States; 51 in part to the policy of the rail- 
roads which are much the largest group of patrons of the lumber mar- 

48 Taken from the current files of Bradstreet's. 

49 Forest Products, Lumber, Lath and Shingles ; annual reports by the Bur. 
of the Census, co-operating with the Forest Service. 

50 "The canvass of forest products in 1909 probably resulted in the most com- 
plete statistics on the subject ever secured." For. Prod. No. 2, 1909, p. 3. 

51 Com. and Fin. Chron., Vol. XCVIII, Feb. 7, 1914, p. 422. Building operations 
in New York City in 1913 were the smallest since 1903. 



THE PRICES OF LUMBER 103 

ket; and in part, as is shown in the following chapters, to a substantial 
diversion of demand to substitute materials, superinduced by the high 
lumber prices of the period, 1904 to 1907. 

Prices of Lumber and of Other Building Materials. 
Among the widely used substitutes for lumber have been brick and 
other clay products, stone, cement and steel. In 1887 brick and stone 
were in wide use. Iron buildings were occasionally reported in the sta- 
tistics of building. Steel construction was then practically unknown. 
During the succeeding period, however, the proportionate use of the 
substitutes for lumber has greatly increased. Steel car construction has 
threatened to deprive the lumber market of a previously exclusive demand. 
In the following diagram lumber prices are compared with the prices 
of agricultural products and of substitutes for lumber. 52 It is to be noted 
that the rise in the prices of farm products during the period 1908 to 
1910 was approximately as rapid as that in the prices of lumber during 
the period 1904 to 1907. 

General Influences Affecting Lumber Prices. 
Not only in the United States has the operation of general influences 
upon commodity prices been manifested. Similar movements are observ- 
able in the price statistics of foreign countries. That the recent rise in 
the prices of lumber has not been confined to the United States is evi- 
dent in the following table showing the movement of lumber prices in 
European and Asiatic markets. 53 The prices here presented for Europe 
and Japan have been reported by the Consular Service of the United 
States. 54 The same nominal items in different markets and countries 
are not comparable because of variations in grading and in nomenclature. 

TABLE 8. 

Increase in Prices of Lumber in Europe and Japan Between 
ipoo and ipio. 

Base Price, Increase, 

London : 1900 Per Cent 

Best pine boards, per St. Petersburg standard. . $138.69 37. 

Canadian 1st pine, per standard 107.06 67.8 

Canadian 2d pine, per standard 76.64 47.5 

Canadian 3d pine, per standard 57.18 33.6 

American spruce, per standard 60.21 11.2 

Pitch pine planks, per standard 63.26 15.4 

Paris : 

Oak boards, small sizes, per cubic meter 15.24 2.7 

Oak boards, medium sizes, per cubic meter. ... 17.17 4.5 

Oak beams and scantling, per cubic meter 22.96 9.8* 

Pine beams and scantling, per cubic meter.... 13.51 7.2* 

52 See also Appendix IV. 

53 See Appendix IV for a comparison of the relative fluctuations in the prices 
of lumber of different species and of substitutes for lumber in the United States 
and Canada, 1890 to 1912. 

54 "Wages and Prices Abroad," 61 Cong., 2 Sess., 1910, S. D., Vol. 46, No. 477, 
Pts. I, III, IV; esp. I, pp. 18 ft; III, p. 63; IV, p. 4. 



104 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Berlin: 

Pine boards, per cubic yard 4.35 11.3 

Oak, sawed, Class 1 13.80 11.2 

Marseilles : 

Pitch pine beams, per cubic meter 14.95 51.8 

Oak, sawed, per cubic meter 34.73 33.1 

Lyons : 

Pine, timber, per cubic meter 9.26 8.4 

Pine, boarding, per cubic meter 11.58 8.1 

Liverpool : 

Spruce boards, per St. P. standard 33.46 1.8 

Redwood deals, per standard 92.46 18.4 

Pitch pine prime deals, per standard 57.78 43.1 

Edinburgh : 

Yellow pine (3x7), 1st quality, per standard. . . 32.12 67. 

Yellow pine (1x9), 1st quality, per standard. . . 56.46 66.3 

Pitch pine, prime boards, per standard 79.22 13.6 

Yokohama : 

Pine, 1x1x12 2.46 24. 

Cedar, 1x1x12 2.84 20.4 

Oak, 1x1x12 5.50 31.8 

Tokio : 

Pine, 1x1x12 2.21 37.9 

Cedar, 1x1x12 2.71 24.4 

Oak, 1x1x12 5.51 47. 



* Decrease, see text. 

Increase in World Prices of Lumber. 
The above comparisons indicate that, in general, the rise in lumber 
prices during the decade 1900 to 1910 has been a feature of the world 
markets. An apparent exception in the Paris prices of heavy dimension 
timbers has been explained, in part, at least, by the relatively high prices 
of these items in 1900, the base year (e.g., cf, Lyons). These prices 
were in part a reflection of the great building activity in Paris during 
that year. Different items in the same market and the same (nominal) 
item in different markets show increases for the period ranging between 
1.8 per cent and 67.8 per cent. Many factors intervene, however, in 
any attempt to analyze exhaustively the international prices of lumber 
and of other forest products. 55 Among these are the character, extent 
and ownership of the forest resources of each country; the predom- 
inance of exports or of imports of lumber ; the industrial characteristics 
of the people ; geographic and climatic conditions ; racial customs. 

5 5 The Forest Resources of the World (Zon, R.), For. Serv. Bull. 83, 1910, 
pp. 5, 6; also American Lumber in Foreign Markets, Special Consular Reports, 
Vol. XI, Bureau of Statistics, Dept. of State, 1894, pp. 159, 167, 172, 176 ft. 



THE PRICES OF LUMBER 



105 



1 1 1 1 1 


1 1 1 1 1 i 1 


i 


-\ e*V 


•o/ =A *° \ 




~"~ j I 


/ / \ 


■"■ " 


— C. T 


v\ y 


01 w- 




\\ '---.. 




— ^---^ 


! s) .-■> 


SOtl— 


~~ *C^ **» 


\V-V" 


— 




3 \\ 


WH- 


— CO 


h. ^ \ 


— 


— a: oo 




Wbl- 


™ £ a: 




\ 


— 


"- 3 ui a: 


N. V \\ 


TObl- 


-J => j— ^ Dl 


^S^ x. »* 




«t q Q — ±u 




f 1 \ 


— 


H "* 21 CD ^ 






_ j o: a f= ^ a: 
=» w & o o £J 


-X. oai col /it- u^s 

\X\ / 


OObl- 


~ <j^6I 




8181- 


: II! 


i LJ 

i QQ 


\C\ 


~| si I a a s 


1 SI Si a * SI o, § 


U8I- 



DIAGRAM 19. 
Relative Annual Prices : Lumber, Agricultural Products and Substitutes for Lumber. 



106 THE ORGANIZATION OF THE LUMBER INDUSTRY 

The prices of wood, both saw timber and firewood, in Great Britain 
and in the states of the German Empire, indicate that the general move- 
ment has paralleled, on a distinctly higher actual level, that of the 
prices of corresponding items in the United States. 56 The price of oak 
stumpage in Prussia has been recently estimated at three times, and in 
Wurttemberg at more than six times the average price of an even better 
quality of oak stumpage in the United States. 57 The prices of white 
pine timber (second growth) of New England approximated (1910) 
those of Scotch (Scots) pine in Prussia. They were but little more 
than one-third as high as the prices of similar timber in Wiirttemberg. 58 

These excessive divergences have not, however, extended beyond 
stumpage prices. A much closer approach to uniformity, as between 
markets and between countries, has existed in the prices of the manu- 
factured product, lumber. Beyond this generalization 59 a comparison of 
lumber prices in the United States with foreign prices has been imprac- 
ticable without an investigation into local historical and static factors. 
Beyond the demonstration of a general decline in lumber prices before 
the middle nineties, and of an occasionally interrupted subsequent rise, 60 
a comparison with foreign prices is of little interest. The world-wide 
operation, however, since about 1896, of a net price raising influence is 
manifested. 



56 Forest Resources of the World, pp. 33, 34, 45. 

57 Ibid., p. 72. 
ss Ibid., p. 73. 

59 "The difference in the wood prices here and in European countries is very 
great indeed, but still they do not show the actual difference in the value obtained 
from timber in this and other countries. These [see text] refer only to the used 
part, which is much greater in Europe than here, and therefore the difference 
between the stumpage value per tree obtained in this country and abroad must 
be still greater." Ibid., p. 73. 

eo Bartholemew, J. G., F. R. S. E., The Atlas of the World's Commerce, 
157 to 160. 



THE INFLUENCES 107 



CHAPTER VI. 

THE INFLUENCES WHICH HAVE AFFECTED THE PRICES 
OF LUMBER : EDUCATIVE AGENCIES AND EXHAUSTION. 

The sensitiveness of lumber prices to changes in the effective supply 
has been described. The readiness of their response to readjustments 
in current conditions of demand has been shown to have been quick- 
ened by the activities in recent years of associations and of trade journals 
in disseminating among manufacturers and distributors reports on cur- 
rent industrial, mercantile and financial conditions. A close approxi- 
mation to a constant differential has existed between the prices for the 
same item in different markets. As the essentially producing regions 
have become more and more distinguishable from the consuming regions 
this differential has tended to become more stable. The range of prices 
in the same large market for similar items has been shown to have been 
narrower during periods of rising prices than during periods of price 
depression. 

Methods of Accounting and Statistical Practice. 
The practice of bonding large timber holdings characteristic of the 
period, since the early eighties, during which the center of lumber manu- 
facture shifted from the Lake States to the South and to the West Coast, 
has revolutionized methods of accounting among manufacturers of lum- 
ber. Financial houses, before undertaking the flotation of bonds, have 
required a thorough invoice of the security and periodic reports on the 
status of the business and on the value of the security. The improve- 
ment has been marked, though there have yet remained careless prac- 
tices and others wholly unsound in theory and misleading in their sta- 
tistical applications. 1 

Before the inception of this period of bonding and in many sections 
thereafter, the books of lumber manufacturers were, judged by the more 
modern standards of accounting practice, notoriously ill-kept. 2 Invoices 

1 Goodman, R. B., in Business and Lumber Trade Conditions, No. 33, Nov. 18, 
1914, p. 1 : "cost accounting has been carried to further refinements in the southern 
operations than in any part cf the country." 

Ibid., p. 3 : "We believe that the future of the lumber business is not in 
higher prices, but in greater efficiency; not in higher prices, but in more stable 
prices. Full and open discussion of costs similar to the full and open reports 
on the prices obtained is what is most needed for efficiency and stability. The 
only warning is that too great care cannot be used in making a complete, instead 
of a partial and incomplete, tabulation of lumber costs." 

2 Before the days of a multiplicity of grades of lumber the requirements were 
comparatively simple. Standing timber was moreover of so little value that the 
owner had no great interest in knowing just how much he had. Bonding of timber 
was practically unknown. For example, in the Saginaw white pine district only 
three grades of lumber were known to the manufacturer, shipping culls, common 
and uppers. These were loaded, mill run, almost indiscriminately and shipped 
over the Great Lakes to a distributing point. There they were sorted. The north- 
ern pine manufacturers have since then distinguished, at the mill, over 375 dif- 
ferent items and a multiplicity of grades. 



108 THE ORGANIZATION OF THE LUMBER INDUSTRY 

were often irregular and books once balanced were frequently discarded. 
Organization of manufacture and distribution was, on the average, as 
crude as were accounting methods. Standing timber, as long as it was 
plentiful, was not of enough importance in the estimation of its owner 
to justify the careful appraisal of its amount. The stand of merchant- 
able timber in the United States was, therefore, unknown. Early esti- 
mates have proved to have been mere guesses. 3 The recent thorough 
investigation conducted by the Department of Commerce, since 1907, 
has given the only reliable data on this now vital subject. 

The inadequacy of former estimates is well attested by an inter- 
esting fact: Since 1880, 200,000,000 M feet more of timber has been 
cut for manufacture into lumber than was estimated as the total stand 
in the United States in that year. Moreover, there yet remains stand- 
ing over three times the amount of the estimate of 1880. The supply 
convenient to consuming territory has been relatively depleted. The 
chief distinguishing characteristic of lumber manufacture is thus the 
character, distribution and supply of its raw material. Merchantable 
stumpage has become the source and the end of vital modern forestry 
problems. But the dependable data cover only recent years. Conclu- 
sions of mathematical precision are, therefore, impracticable to the statis- 
tician. 



Dynamic Influences on Lumber Prices. 
The explanation of static changes and adjustments in the phenom- 
ena of lumber prices cannot account for the great historical price move- 
ments. The conspicuous long-time changes in price level indicate the 
action of dynamic influences. The course of general lumber prices as 
compared with the relative prices of all commodities has exhibited 
marked peculiarities. It is assumed that lumber prices have been af- 
fected by all general price influences and that these general factors are 
an adequate explanation of the historical phenomena of lumber prices 
in so far only as such phenomena have coincided with similar phenomena, 
during the same period, in the movement of general commodity prices. 
Peculiar phenomena, however, measured by the extent and by the direc- 
tion of departure from the course of general relative prices, are assumed 



3 Tenth Census, Sargent, 1880, 856,290,100 M feet. This estimate by Sargent 
does not include Douglas fir or western yellow pine, the former being the most 
important single species remaining. 

Hotchkiss, in 1898, in "Lumber and Forest History of the Northwest," 1,400,- 
000,000 M feet, of which 1,000,000,000 M feet stood in the Pacific States. 

Twelfth Census, 1900, Gannett, 1,390,000,000 M feet. Of this 800,000,000 M 
feet was attributed to the "Western States." Fernow, B. E., in 1902, in "Economics 
of Forestry," p. 52, 2,000,000,000 M feet. To the "Western States" were attrib- 
uted four-tenths of the total; to the "Northern States" one-fourth. The latter 
was a considerable overestimate. 

Long, R. A., in 1903, January, at the 13th Annual Meeting of the Southern 
Lumber Manufacturers' Association, in a paper on "Stumpage," estimated 822,682,- 
000 M feet of soft woods, a tremendous underestimate. 

The American Lumberman in 1905, September, 1,970,000,000 M feet. 

Forest Service, 1909, Kellogg, R. S. "The Timber Supply of the United 
States," Circular 166, p. 8, 2,500,000,000 M feet. 

Bureau of Corporations, 1911, 2,800,000,000 M feet. 



THE INFLUENCES 109 



to have been due to peculiar influences, i. e., to causes not operative upon 
general commodity prices or not operative to the same degree. 



Lumber Prices and General Prices Compared. 
The nature of the historical phenomena of lumber prices as com- 
pared with general prices has been indicated by Diagrams 1 and 11. For 
the period, 1860 to 1913, as a whole, covering 53 years, general prices 
fell from 126.3 to 121., or 4.2 4 per cent. For the same period lumber 
prices increased from 40.5 to 140.8 or 247.6 per cent. Between 1860 
and 1873 general prices increased, net, to 169.3 (currency) or 34 per 
cent; lumber prices increased to 95.1 (currency) or 134.8 per cent. 
During this period the local manufacture of lumber for local use to a 
large extent disappeared. In the Eastern States the sources of manu- 
facture receded into the more inaccessible parts of Northern Pennsyl- 
vania, New York and Maine. The center of the lumber industry shifted 
to the Lake States while the yellow pine industry of the South was 
prostrated by the war and during reconstruction. 5 

Thus during the period of the first great shift of the central source 
of lumber supply 6 to a more distant region the net relative increase in 
lumber prices was nearly four times as great as the net increase in 
general prices. 7 For this period descriptive data are inadequate. It 
should be noted, however, that the first instance of exhaustion of timber 
supply close at hand, as expressed in the radical shift in the centraliza- 
tion of the industry, occurred during a period when association price 
activities and attempts at artificial restraint of trade were practically 
unknown. Undoubtedly the remarkable relative increase in lumber prices 
during the early period was caused by natural influences. These influences 
may, however, have been, in part at least, abnormal because of the exten- 
sive industrial readjustments incident to the war. 8 

With the center of lumber manufacture established in Michigan, at 
a distance from the centers of lumber consumption, extensive timber 
tracts were opened to exploitation. Between 1873 and 1881. under con- 
ditions of abundant supply, the course of lumber prices has more nearly 
paralleled that of general prices. 9 In fact, during the three years follow- 
ing the panic of 1873 lumber prices fell more sharply than did average 
commodity prices. The lumber industry shared fully the subsequent 
depression. 9 " But when, in the early eighties, production in Michigan 



4 See supra, p. 78 : these prices are relative ; i. e., in terms of the average for 
base years, 1901 to 1903. 

5 See Diagram 5, p. 28. 

6 See Diagram 7, p. 33. 

7 I. e., 134.8: 34 (percent) ::4:1 (approximately). 

8 To avoid undue emphasis upon phenomena arising under abnormal conditions 
we have begun the more intensive analysis of lumber prices with the year 1880. 
Reference is made, however, to the earlier period (1860 to 1873) in the case of 
generalized tendencies of lumber prices ; also where an analogy can be pointed 
to in the course of subsequent price movements. 

9 See Diagram 12, p. 82. 

»«45 Cong., 2 Sess., 1877, 1878, Cong. Rec, Vol. 7, Pt. 1, p. 851. 



110 THE ORGANIZATION OF THE LUMBER INDUSTRY 

began to decline 10 and the center of manufacture moved farther and 
farther west through the Lake region and finally in the nineties shifted 
to the southern pine belt, lumber prices again, as compared with gen- 
eral prices, tended to rise rapidly. The subsequent phenomena have been 
indicated in Diagram 1. There it is shown that the direction of the diver- 
gence of lumber prices from the average level for all commodities has 
been almost constant since 1880, i. e., toward a higher level for the former. 

The occasional interruptions in the continuity of the relative upward 
movement have ocurred, for the most part, during periods of insecurity 
in general financial conditions. Thus, after the panic of 1873 lumber 
prices fell rapidly. Again in 1888, 1893, 1900, 1903, 1904, 1907 and 
1908, lumber prices are shown to have been more responsive to the in- 
fluences of depressed market conditions that were average commodity 
prices. The sharp temporary decline in lumber prices during the latter 
part of 1900 is concealed within the average for the entire year shown 
in Diagram 1. A more correct impression may be had from the quar- 
terly prices shown in Diagram 12. 1X 

Influence of industrial depression. The very conspicuous relative 
decline in lumber prices during 1907 and 1908 was in great measure 
intensified by over-production, superinduced by the high prices of lum- 
ber during the preceding three years. During this period of general 
prosperity the productive capacity of the industry had grown to dimen- 
sions greatly in excess of the average normal requirements of the lum- 
ber market. 12 Enforced reduction of output caused by the collapse in 
demand during the depression occasioned considerable financial distress 
among many manufacturers, especially in the South, and to a less de- 
gree in the Pacific Northwest. The increased mill capacity, too confi- 
dently built upon the hopes inspired by general prosperity and by high 
prices, became an incubus upon the industry. To meet accruing obliga- 
tions, as has been previously pointed out in this volume, enforced liquida- 
tion of assets through the offering for sale of larger quantities of lumber 
than the current demand would apparently justify, has contributed sub- 
stantially to the decline in prices. 



10 The Saginaw Valley was the first home of the white pine industry in the 
Lake region. An index to the degree of exhaustion there by 1880 is to be found 
in the decline in average quality of the logs cut. In 1860 first quality lumber 
w'as yielded by 75 per cent of the logs ; in 1880 by only 10 per cent. 

Stevenson, Wm., Wood: Its use as a constructive material. 1894 (London), 
p. 238. 

11 During the same year (1900) the decline from the highest to the lowest 
monthly relative prices of "all commodities" was 3.9 per cent. Bur. of Lab. 
Stat. Bull. 149, p. 19. The corresponding decline in lumber prices was 12.9 per 
cent. See App. IV. 

12 In the annual address of the president, delivered at the meeting of the West 
Coast Lumber Manufacturers' Association, Tacoma, Wash., January 30, 1914, the 
general situation in the lumber industry was commented upon : "The country at 
large should know and be familiar with some of our problems. They should 
understand that we have a great surplus sawmill capacity, which can at any 
time spoil good market conditions by overproduction. This fact given publicity 
should at least deter others from coming in and investing in an industry already 
overdone." 



THE INFLUENCES 111 



With the few exceptions noted, therefore, and these only temporary, 
the course of lumber prices since 1880, as portrayed in Diagram 1, indi- 
cates the operation of some powerful dynamic influence or influences in 
the direction of higher prices. These influences must have been continu- 
ous in their operation. They must also have been peculiar influences, i. e., 
in the sense that they were either not operative at all or were not oper- 
ative to the same degree upon general commodity prices. 

Analogy to lumber prices, i860 to 1873. It is to be here noted, as is 
later pointed out in detail, that the recent investigation by the Depart- 
ment of Commerce, of competitive conditions in the wholesale distri- 
bution of lumber has been instituted on the assumption, here shown to 
have been erroneous, that the conspicuous recent rise of lumber prices as 
compared to general prices, began in 1806 and 1807. That the present 
movement, however, began in 1880 and 1881 has been shown in Diagram 
1. (See also Appendix II.) Moreover, between 1860 and 1873, i. e., 
during the period in which occurred the first great historical shift of the 
center of lumber supply to a distant foreign source, there appeared the 
same phenomena of lumber prices, as compared to general prices, as those 
which have been recently under review by the Department of Com- 
merce for the period since 1897. In fact, the average relative increase 
in lumber prices, i. e., as compared to general prices, during the period of 
the first general shift of supply sources, was more conspicuous than has 
been any subsequent relative increase. 

The assertion is sometimes made that organized price activities of 
associations of manufacturers in attempted restraint of trade "have had 
and do have an important effect on the actual sale prices of lumber." 13 
On the other hand, between 1880 and 1897, there was an equal relative 
rise in lumber prices as compared to general prices, although there was 
then little or no organization of wide influence among manufacturers to 
act in restraint of trade. There is but little evidence of the intervention, 
since, 1896 and 1897, of any "important" price-raising influence which 
had not previously been operative. If a "substantial" part of the 
relative rise in the prices of lumber since 1897 has been due to arti- 
ficial organized price-raising activities, there can be no sufficient explana- 
tion of the previous and equal relative increase between 1880 and 1897. 

Having described the range and the character of the price phenom- 
ena attributable to influences peculiar to the lumber industry, such influ- 
ences are hereinafter discussed as follows: 

First. Development of lumber trade journalism and of the 
educative functions of associations of manufacturers. This caption 
embraces the organized endeavors to place "within reach of the 
lumberman such information as would enable him to secure "top" 
prices for his product and would promote uniformity in prices 
of identical items where a greater or less degree of promiscuity 
had previously prevailed. 



13 The Lumber Industry, Pt. IV, p. 12; also p. xvii. 



112 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Second. Relative exhaustion of convenient timber supply. 

Third. Increase in the use of substitutes for lumber. 

Fourth. Attempts at organized artificial interference with the 
operation of natural price influences. 

Educative Agencies in the Lumber Industry. 
The influence upon prices of the development of tirade journalism 
and of the educative activities of associations is incapable of precise 
estimation. That this service has been highly valued by the lumbermen 
themselves is evident. As has been pointed out, this has constituted 
a major function of the several associations, administered at considerable 
expense. Any manufacturer or distributor, whether he do or do not be- 
long to any association, has had access through the lumber trade jour- 
nals 14 to current information as to prevailing market conditions. His bar- 
gaining ability has been greatly strengthened. As a natural conse- 
quence, there is now much less promiscuity in prices. 15 Although there 
has developed no organized "lumber market" — such as has character- 
ized, for example, the cotton industry — lumber "exchanges" have long 
existed as a part of the distributive mechanism in many large cities. 

Early Interest in Technology of Production. 
After the Civil War, when the centers of lumber production 
steadily withdrew to a distance from the consuming markets, it was 
believed that mill prices of lumber lagged tardily behind the current 
fluctuations in the tributary markets. 16 Custom was then an important 
price determinant, an inheritance from the era, then disappearing, of 
local manufacture for local use. The lumber manufacturer was pri- 
marily interested in the achievement of the maximum of efficiency in the 
technology of production. To him the lumber industry was to be 
found in the logging camp and in the sawmill. The study of market 
conditions, of the competition of other species and of methods of ex- 
tending his markets was a minor concern. This was the function of 
the distributing agents. Said a former Assistant Forester of the 
United States 17 in 1902: 

"In effective methods for the harvesting and manufacture rt 
lumber the American lumberman has no superior, nor is he 
equaled in his disregard for the future of the forest which he cats." 

Also, "In spite of steady improvement in tools, logging out- 
fits and mill machinery all tending to cheapen the cost of lumber- 
ing, the price of lumber increases steadily and rapidly." 



14 There are a great number of journals, weekly, bi-monthly and monthly, 
some devoted exclusively, others in part, to the interests of the lumber industry. 
Of these the American Lumberman has perhaps the widest and most representa- 
tive interests. Its files and those of its antecedents have been extensively cited in 
this monograph. 

15 See supra, Diagram 3, p. 1 24. 

™ Committee on Finance, U. S. Senate. 53 Cong., 2 Sess., 1894, Sen. Rep., 
Vol. II. Nos. 444-446; 451; Bull. Nos. 27-30. 

17 Price. O. W., Influence of Forestry upon the Lumber Industry ; in Dept. 
of Agric. Yearbook, 1902, p. 310. 



THE INFLUENCES 113 



Stability and Efficiency of Organization and Method. 
The same writer commented upon the constant variations in lumber 
prices: 18 

"The wide fluctuations characteristic of lumber values today 
is much more the result of conditions within the industry itself 
than of variations in the demand for the product of the forest. The 
uncertainty of available supplies, the lack of true proportion be- 
tween stumpage values and lumber values, the speculative features 
which the industry now presents, have all tended to produce an 
exceedingly unstable and abnormal fluctuation in the prices of 
lumber, with a marked disposition toward rapid increase." 

It has been toward the elimination of speculative elements and 
toward the greater stability and efficiency of organization that the in- 
fluence of the educative activities has been extended. Fostered by the 
trade press, encouraged and promoted by the associations and accepted 
by manufacturers as a valuable business principle, thorough acquaint- 
ance with market relations has succeeded to the high position formerly 
occupied by expertness in technology. As a result the lumber industry 
has lost many of its former crudities. Dynamic changes in the con- 
ditions of the industry, especially in respect to the supply of timber, 
have led to the demand, so characteristic of modern manufacturing in- 
dustry, for "efficiency" and "economy." 19 Today it may be said that 
the lumber industry on the whole is well organized and familiar with 
the best of modern business methods. 

In this direction its achievements have been comparatively recent. 
Permanent organizations of manufacturers were unknown before the 
early eighties when first appeared the evidences of approaching relative 
exhaustion of the northern forests. Nor did the trade journals play a 
prominent part in the industry until much later. They have been 
partly the result and partly the cause of the historical influence which 
has resulted in greater uniformity of all prices of lumber. Probably 
the actual average level of prices has also been raised. What change 
in price level, however, is attributable directly to the influence of such 
educative activities cannot be determined with precision. In the elimi- 
nation of purely static fluctuations their effect has been much more mani- 
fest. 

Exhaustion of Timber Supply. 
As a surplus of timber means only a relative surplus, relative, 
that is to demand, so exhaustion of timber supply can mean only rela- 
tive exhaustion. If the total demand remain constant and the annual 
drain upon the forests be greater than the annual regrowth; or if an- 
nual growth equal the annual cut. i. e., if the physical quantum of 
available supply be a constant and the total annual demand increase, 
there is a relative exhaustion of supply, relative that is, to demand. 
The economic effect of either condition would be the same, although 



18 Ibid., p. 312. 

19 See Appendix V, p. 152. 



114 THE ORGANIZATION OF THE LUMBER INDUSTRY 

the latter condition might not, perhaps, be conventionally referred to 
as denoting exhaustion. 

The causes of the exhaustion of timber have been not only the 
cutting of stumpage for use in lumber manufacture. They have in- 
cluded also the uses of standing timber for other industrial purposes, 
the sacrifice of forests for the clearing of agricultural land and the 
fortuitous destruction of timber by fire and by insects and windfall. The 
manufacture of lumber is the chief industrial use to which standing tim- 
ber has been devoted. For this purpose a high average quality of tim- 
ber has been required. Other industrial uses have been the manufac- 
ture of shingles, lath, cross-ties and mine timbers, the production of 
pulpwood, tanbark, firewood, cordwood for chemical distillation, naval 
stores, posts, poles and fence rails, and miscellaneous uses connected 
with the various secondary wood-using industries. To a considerable 
extent, these have competed with the lumber manufacturing industry 
for the use of standing timber. On the average, however, the demands 
of these minor industrial uses have been satisfied by a grade of timber 
inferior to that which is suitable for manufacture into lumber. The 
by-products of lumber manufacture are now frequently absorbed by the 
secondary wood-using industries. 

The sacrifice of forests for agricultural purposes has been the 
cause of the destruction of large stands of timber, especially in the 
central hardwood region. For a long time, standing timber was con- 
sidered an encumbrance to the soil and as a menace to the development 
of agriculture. The rapid westward extension of the frontier has 
been the occasion of the systematic destruction of a large percentage 
of the original stand of hardwood stumpage in the United States. The 
insect scourge has destroyed much timber of valuable species, for 
example, chestnut. By far the most important of the non-industrial 
causes of the present condition of relative exhaustion has been the 
forest fires. While available data are incompetent to show the magni- 
tude of the fire loss in the United States, it is well known that it has 
greatly hastened and accentuated the exhaustion of the eastern forests 
and that the fire hazard is still great in the privately owned forests 
of the West. 

Character and Range of Influence. 
But exhaustion means more than the mere reduction in the total 
quantity of standing timber. It regards also the quality of such tim- 
ber and its location, i. e., its geographical relation to the consuming 
territory. For example, the shift of the center of lumber manufacture 
from the North to the South did not occur because it was hard for 
the lumber manufacturer in the Lake region to secure timber. It oc- 
curred because of the difficulty of securing timber of the high quality 
then required to meet the demands of the lumber market. 

Exhaustion, therefore, in a scientific sense, means a condition of 
timber supply wherein it is more difficult than it has been at some pre- 
ceding time, to get merchantable timber, i. e., timber suitable for manu- 
facture into lumber, which is in location as convenient and as acces- 



THE INFLUENCES 115 



sible to the consuming markets as that which the lumber manufacturer 
has been accustomed to use. To be more difficult means that it costs 
more. It costs more per unit to cut the timber and to carry the logs 
to the sawmill when the mill itself is not moved but when the logs 
which supply it come from a greater distance or from more inaccessible 
parts of the forest. In this case, the increase in cost is reflected in the 
price of sawlogs laid down at the mill. The mill itself remains in its 
previous geographical relation to the lumber market. 

But, instead of going farther and farther away from the mill to 
secure his timber (or logs), the manufacturer may move to another 
timbered region (e. g., the shift from the Eastern States to Michigan; 
from the Lake States to the South). There he may secure his sawlogs at 
the mill at no greater, or perhaps, at even a smaller cost per unit 
than he had previously paid in his former location near to the consuming 
territory. But he is farther from the markets, and what he has saved 
because of lessened cost of standing timber, of logging and of delivery 
of logs to the sawmill, has been approximately equalled — and perhaps ex- 
ceeded — by the increase in the cost, to him, of transporting his product, 
lumber, to the consuming markets where he has to compete with manu- 
facturers of other species of timber or from other producing regions. 
That there is only approximate equality has been due to the interaction 
of dynamic forces — such, for example, as the continual increase in popu- 
lation and the continued projection of the center of lumber consumption 
toward the West. The geographical distribution, that is, of population, 
and hence of lumber consumption, has not remained constant. It has 
continually moved toward the West, thereby counteracting, in part, the 
economic disadvantage of the projection of lumber manufacture to the 
more remote regions of the Southwest and the West. Thus, for exam- 
ple, has the market for lumber originating in the far South and in the 
Pacific Northwest been greatly extended. 

Extension of transportation facilities. Doubtless the most important, 
economically, of these dynamic influences has been the development of 
transportation facilities which have made accessible immense forest re- 
sources which, at the time of the shift from the Lake region to the South, 
had only a potential value, or rather, perhaps, a present value based only 
on anticipated distant future uses. West Coast timber has until recently 
had a value highly speculative. Until the recent period of rising actual 
lumber prices, much of the West Coast stumpage had no value whatever 
for present use, i. e., for immediate manufacture. Its value then consisted 
exclusively of individual owners' estimates of the uses to which contingent 
future developments were expected to give rise. Such estimates have been 
of course speculative. Moreover, the value of all timber withheld from 
the axe will necessarily continue to be more or less speculative as long 
as dynamic influences exist, which are capable of changing the condi- 
tions upon which such timber may in the future be converted into 
directly marketable products. The charge 20 of speculative holding of 



20 The only issue in fairness is as to whether the United States or private 
owners should have done the speculative holding. 



116 THE ORGANIZATION OF THE LUMBER INDUSTRY 

standing timber is therefore simply the plain admission of an inevitable 
economic fact. 

Classification of Influences Due to Exhaustion. 
'The exhaustion of the supply of virgin timber will lessen the 
chances for speculation and more closely restrict profits to those which 
arise from growing and manufacturing [as distinguished from simply 
owning] timber." 21 There are two ways in which exhaustion of timber 
has tended to cause an increase in the prices of lumber. First, through 
an increase in the cost of stumpage, logging and delivery to the mill. 
This effect is summed up in the higher price of logs "in the water," i. e., 
laid down at the sawmill. Second, through an increase in the average 
cost of the transporting the lumber from mill to market. This means 
that there has been an increase in the proportion of the lumber supply 
which has been marketed at a high transportation cost per unit. 

A clear illustration of the operation of this principle may be found 
in the case of the Chicago softwood market to which northern pine has 
been shipped from Minnesota; yellow pine from Louisiana and fir from 
Washington. Formerly nearly all the supply came from the Lake 
States. When the industry shifted to the South, the lumber manufac- 
turer paid there much less, on the average, for stumpage, logging and 
delivery to the mill than did his northern competitor. The latter, how- 
over, shipped his lumber to Chicago on a 6 to 10 cent (rail r rate per 
100 pounds (or less by water), while the yellow pine producer had to 
pay 23 to 26 cents per 100 pounds. Recently the West Coast manufac- 
turer has, on the average, produced lumber more cheaply per unit than 
the southern pine manufacturer, because of !lower stumpage prices 
and the more economical methods of logging and delivery. To com- 
pete in the Chicago market, however, West Coast lumber has borne a 
rate of 55 to 60 cents per 100 pounds, or nearly $15 dollars per M feet. 

Cumulative Evidence of Exhaustion in Leading States. 

Since the early eighties have marked the period during which lum- 
ber 'production in Michigan began to decline, the year 1880 has been 
taken as the starting point 210 in the comparison of the cumulative 
evidences of exhaustion with the peculiar phenomena of lumber prices. 
See Diagram 1. In the following table the percentage distribution of 
lumber production since 1880 is shown for eighteen leading states. 
The order in which the states are named has been determined by divid- 
ing the percentage of the total cut in 1912 for each state by its percentage 
of the total production for the period, 1880 to 1907. The state showing 
the smallest quotient, as thus determined, has been given the position 
indicating the greatest exhaustion of timber supply, i. e., at the head 
of the list. This classification has been wholly arbitrary and in many 
cases has not well represented the facts. It is, however, as satisfactory, 
perhaps, as any other arbitrary order. That Michigan heads the list 

"Kellogg, R. S., and Zeigler, E. A., The Cost of Growing Timber, p. 4. 
"» Southern pine had begun to compete with Lake States white pine in the 
central and eastern markets. 55 Cong., 1 Sess., 1897, S. D., Vol. 4, No. 40, p. 2. 



THE INFLUENCES 117 



is due only to the obvious fact that prior to 1880 an advanced condi- 
tion of exhaustion had been already reached in New York, Pennsyl- 
vania, Ohio and Indiana. 

TABLE 9. 
Distribution of Lumber Cut by States: Percentage of Total Product. 

1880 to 
1880 1890 1900 1907 1907 1909 1912 

Michigan 23.5 

Indiana 5.06 

Pennsylvania 9.6 

New York 6.5 

Wisconsin 8.54 

Ohio 5.02 

Minnesota 3.1 

Georgia 2.49 

California 1.66 

Texas 1.81 

Alabama 1.39 

Arkansas 95 

North Carolina 1.34 

Oregon 98 

Mississippi 93 

Washington 88 

Louisiana 74 

Idaho 1 

These figures considered in connection with Diagrams 5 and 6 
clearly show the manner in which, coincident with the cutting out of the 
virgin timber in the East and the North, the market has turned for its 
lumber to the forests of the South and the West. For the period between 
1880 and 1907, when lumber prices reached a maximum, the percentage 
distribution of the total production among geographical divisions was 
as follows: 

Lake States (and Iowa 22 ) 27. 

Southern States 27.4 

Pacific States 10.3 

Eastern States 1 1.4 

Central States 14.8 

Northeastern States 6.6 

Rock Mountain and Prairie States 2.5 

Exhaustion of important species. Because of the close association 
of different species of lumber with certain geographical regions, the 
historical movements indicated in the following diagram correspond in 
general with those depicted in Diagram 5. The percentage distribution of 
the production of lumber of individual species is shown for the. period 

22 Lumber manufacture accredited to Iowa has been almost wholly of logs 
floated down the Mississippi River system from Wisconsin and Minnesota. For. 
Prod., No. 2, 1911, p. 10. 



18. 


8.6 


4.55 


12.5 


4.2 


3.8 


3.16 


2.95 


1.25 


3. 


1.3 


1. 


8.92 


6.65 


4.3 


7.3 


3.3 


2.5 


3.86 


2.5 


2.1 


3.3 


1.5 


1.3 


11.6 


9.65 


4.96 


9.4 


4.5 


3.8 


2.36 


2.82 


1.31 


2.7 


1.2 


1.3 


4.55 


6.66 


4.13 


5.1 


3.5 


3.7 


2.4 


3.73 


2.12 


2.9 


3. 


2.4 


2.16 


2.1 


3.34 


2.3 


2.6 


3.1 


3.52 


3.46 


5.55 


3.7 


4.7 


4.9 


2.46 


3.13 


3.4 


2.7 


3.8 


3.5 


2.24 


4.62 


4.95 


3.5 


4.7 


4.7 


2.15 


3.66 


4.03 


3. 


4.9 


5.6 


1.86 


2.09 


4.06 


2.3 


4.3 


4.9 


1.9 


3.44 


5.2 


3. 


5.8 


6.1 


4.45 


4.07 


9.4 


4.8 


8.7 


10.5 


1.26 


2.89 


7.4 


3.1 


8. 


9.9 


.11 


.19 


1.27 


.3 


1.5 


1.8 



118 THE ORGANIZATION OF THE LUMBER INDUSTRY 



i — i — r 



i r 



u> 



cc 



iLca cr> =4- to — 



*l 



1 «T 1 




DIAGRAM 20. 
Distribution by Species ; Percentage of Total Annual Lumber Product. 



THE INFLUENCES 119 



since 1899. 23 1 yellow pine; 2 Douglas fir; 3 white pine; 4 hemlock; 
5 oak. These were the five leading species in both 1899 and 1912 ; they 
constituted 77.1 per cent of the total production in the former year and 
73.5 per cent in the latter. During the fourteen year period the relative 
production of white (northern) pine has declined 63.7 per cent; of 
hemlock 36.7; of oak 33.4; of spruce 23.8 per cent. Douglas fir has, 
however, increased 164 and yellow pine 35.2 per cent. 

Relation of Lumber Prices to Exhaustion. 
The most convincing evidence of the connection between exhaustion 
of timber supply and high lumber prices is to be found in the coincidence 
in time between the appearance of the peculiar lumber price phenomena, 
about 1880, described in Diagram 1, and the first considerable indications 
of exhaustion in the Eastern Lake States region. The universality and 
continuity of these phenomena throughout the United States are in 
themselves additional proof of this connection. That the influence of 
relative exhaustion is an adequate explanation of the peculiar extent of 
rise in lumber prices is, furthermore, attested by two facts: 

First, that in Canada, where the conditions of supply and 
of production, as well as the habits of inordinate consumption, have 
closely corresponded to those characteristic of the United States, 
almost identical price phenomena are observable. For these no gen- 
eral explanation has been advanced other than the postulation of : a. 
increase in stumpage prices ; b. shift to distant sources, e. g., to Brit- 
ish Columbia forests ; c. increase in the cost of production of lumber. 

Second, no other general influence has been demonstrated which 
can account for the price phenomena nor for any substantial part 
thereof. 

Universality of Influence of Exhaustion Upon Prices. 

It is clear that not the whole, nor, on the average, even the larger 
part of the rise in the price of lumber of any single species has been 
due to exhaustion of the supply solely of that particular species itself. 
If this had been the chief cause, the great rise in yellow pine, North 
Carolina pine, and especially West Coast lumber prices, would have 
been inexplicable. The increase has been due rather to exhaustion of the 
supply and to the consequent higher prices of other species with which 
they have competed in the large central markets. Those species of more 
abundant supply have operated as an actual or a potential check to an 
increase in the prices of the less plentiful competing species. This prin- 
ciple is illustrated in Diagram 13. Prices of white pine, for example, so 
increased during the eighties and nineties that the more remote yellow 
pine regions were enabled to compete in common markets. Any subse- 
quent rise in white pine prices was appropriated also by its competitor. 



23 The census figures upon which this diagram is based have been taken from 
the following sources: 1899. 1904, 1906, Forest Service Bull 77, pp. 12, 15; 1905, 
same, Bull. 74, p. 11 ; 1907, Forest Products, 1907; 1908, 1909, same, No. 2, 1909, 
p. 15; 1910, same. No. 2, 1910, p. 9; 1911, same, No. 2, 1911, p. 7; 1912, Lumber, 
Lath and Shingles, 1912, p. 10. 



120 THE ORGANIZATION OF THE LUMBER INDUSTRY 

In such a case the relative increase in yellow pine prices was greater 
than that in white pine prices, since the previous prices of yellow pine, 
in order to compete, has been necessarily much lower than those of white 
pine. An equal addition to a lower base price therefore resulted in a 
more conspicuous relative rise among the cheaper (i. e., other things 
being equal, the species most distant from the market) woods. 

The phenomena exhibited by Diagram 13 are in general such as 
would be the logical result of competitive prices under general condi- 
tions tending to raise the prices of those species which have the cheapest 
access to the competitive markets. Apparent exceptions or anomalies 
may be adequately explained by the peculiar conditions attending the 
production or distribution of individual species, as described in Chap- 
ters II. and III. The influence of differences among the manufacturers 
of different species of lumber, in the average financial strength, is espe- 
cially noticeable. 24 It is thus apparent that the relative rise or decline 
in the prices of the cheaper woods have been more radical than the co- 
incident fluctuations in the higher priced species. 26 The sharpest upward 
and downward price movements (see Diagram 13) have been for Douglas 
fir, southern yellow pine, North Carolina pine and hemlock. 26 

Hemlock an apparent exception. Hemlock has been an apparent 
exception to the principle above stated, since it has had cheap' access 
to the central markets. Its very sharp relative rise has been due, how- 
ever, to the fact that until comparatively recent years despite its nearness 
to the market and despite a considerable degree of exhaustion it has con- 
tinued on a low price level. 27 This fact has several explanations, both 
psychological and objective: 

"Hemlock lumber has always been sold at a lower price than 
northern pine because of a certain prejudice against it." 28 

The course of hemlock prices "follows very closely that of 
yellow pine, of which it is a direct competitor * * * . Hem- 
lock, however, being the cheaper, and, on the whole, the inferior 
wood, cannot expect to sell in considerable quantities on even 
terms with yellow pine. Yet its cost of production, including stump- 
age, is nearly that of the southern wood." 29 

Hemlock has thus been considered as of physically inferior quality 
and, typically, as simply a substitute for other species. Because of its 
proximity to the markets the "cost of production, including stumpage" 
of hemlock would otherwise be normally greater than that of yellow pine. 

24 See supra, p. 61. It will be recalled that the majority of the prices enter- 
ing into the determination of the curves given in Diagram 13 are either mill 
prices or prices at convenient basing points. 

25 Compare the relative fluctuations of the items having a low base price with 
those having a high base price in Appendix III. 

26 The hemlock market has been heavilv influenced bv the demand for hemlock 
tanbark. See A. L., July 13, 1901, p. 12;" same, Dec. 31, 1904, p. 71: St. L. L., 
Aug. 15, 1908, p. 81. 

2 ' See Appendix III, Columns XV, XXVII. 
2 * M. V. L., Aug. 30, 1907, p. 22. 
29 A. L., Jan. 25, 1908. Wausau. 



THE INFLUENCES 121 



This public under-appreciation of hemlock lumber has been recently 
substantially eliminated with the aid of educative advertising by the 
trade press and by the hemlock associations. 

"At least four-fifths of the remaining hemlock stumpage in 
Pennsylvania is controlled by the tanning companies. These com- 
panies permit cutting hemlock timber only as fast as they require 
the bark for tanning purposes, and therefore the hemlock output 
of the State is gradually diminishing until it hardly keeps up with 
the demands of the trade." 30 

This condition of production in Pennsylvania has tended to raise the 
price of the competing Lake States hemlock. 31 

For the very pronounced rise in hemlock prices immediately prior 
to 1907, another condition has been in large part responsible. As early 
as the latter months of 1904 many of the Western railroads diverted the 
use of their cars from lumber traffic to the grain carrying trade. The 
hemlock and northern pine market thus profited at the expense of yellow 
pine and West Coast lumber. 32 Similar uncertainty in the shipments of 
western and southern lumber in 1905 benefited the hemlock market. 33 
Throughout 1906 a car shortage prevailed in the West and the South, so 
that much of the immediate business was diverted to northern pine and 
to hemlock. 34 But northern pine was scarce. Trade was exceptional in 
hemlock lumber which, until normal competitive conditions were reestab- 
lished, invaded consuming territory accustomed to supply by West Coast 
or by Southern mills. 35 When the general business depression in the lat- 
ter part of 1907 put an end to the car shortage, western and southern 
lumber reassumed their normal marketing territory. A radical decline in 
hemlock prices ensued. 36 These factors reasonably interpreted are per- 
haps an adequate account of the apparently exceptional hemlock phenom- 
ena shown in Diagram 13. 

Cheap and high-priced species compared. The steadier price curves 
(i. e., those less subject to violent fluctuation), conversely, are those of 
the relatively high-priced woods. These include white pine, spruce, oak 
and cypress. Oak lumber as representative of the hardwood market, 
has been competitive only indirectly with the softwoods. Cypress, though 
actually a deciduous species, is economically a softwood. Because of 
peculiar physical properties, making it for certain uses, non-competitive, 
and because of the strength of ownership of the timber, cypress lumber 
has commanded a high price and has successfully resisted price depres- 
sing influences. This has, however, been at the expense of current 
sales. Moreover, there had been a remarkable rise in cypress prices 
prior to 1900. Since, therefore, the base price (1901-1903) is high as 
compared to that of other species, the subsequent increases as shown in 
Diagram 13 are the less conspicuous. The curve for white pine shows 

so A. L., July 13, 1901, p. 12. 

3i N. Y. L. T. J., Sept. 15, 1909, p. 31. 

32 A. L., July 2, 1904, p. 65. 

33 Same, Aug. 26, 1905, p. 66. 

s* M. V. L., Aug. 31, 1906, Minneapolis news. 

35 W. C. L., Apr., 1906, Minneapolis news. Al. L., Mar. 23, 1907, Minneapolis 
news. 

36 M. V. L., Nov. 1, 1907, pp. 34, 35. 



122 THE ORGANIZATION OF THE LUMBER INDUSTRY 

in reality the prices of "northern pine." Of this only the highest grades 
are of pure white pine. In the medium and lower grades there has been 
an increasing admixture of Norway pine and of other inferior species, 
e. g., jack pine, tamarack, balsam. In "northern pine" dimension items, 
white pine now rarely appears. The obvious steadiness in price is char- 
acteristic of a species of very limited supply, in the hands of manufac- 
turers .financially able to hold their lumber in their yards instead of 
being forced to meet the low prices of competing woods, as for example, 
in 1907 and 1908. 37 

Continuity of Phenomena of Exhaustion. 
The universality of the influence of exhaustion upon the prices of 
competing woods has been shown. Relative exhaustion of a single 
species has tended to increase the price of lumber of all other species 
with which it has competed. 38 Continuity of the phenomena of exhaus- 
tion is so obviously and conclusively indicated by the statistics of Table 9, 
that discussion of it is unnecessary. Similar continuity in the peculiar 
lumber price phenomena has been indicated in Diagram 1. The sig- 
nificance in the analysis of price influences, of the coincidence in time of 
the peculiar phenomena of timber supply and the peculiar phenomena of 
lumber prices, has been already suggested. 39 

Coincident Lumber Price Phenomena in Canada. 
The prices of actual sales of lumber in Canada taken from in- 
voices, have not been available. The only index to the movement of 
lumber prices has been that issued by the Department of Labour of the 
Dominion of Canada. The constituent items have been described in 
the key to the table of relative prices in the United States and Canada 
in Appendix IV. Since the items included have generally corresponded 
and since the methods and sources of price statistics have been similar, 
Canadian lumber prices are there compared with prices in the United 
States, derived from the Bureau of Labor Statistics index for "Lumber 
and Building Materials." Since the items included in the two indices are 
equally representative and the methods and sources of price collection 
have been almost identical, a direct comparison has been possible. A re- 
markable agreement in price movements in the two countries since 1890 
is manifested. 

Similarity of conditions of manufacture. As between the United 
States and Canada the average cost of production of lumber has been 
nearly equal. The cost of woods and mill labor has been, perhaps, some- 
what lower in Canada, but the higher prices of machinery and equipment 
have approximately balanced the equation. 40 That the tariff which, 
except during the period 1894 to 1897 and again recently since 1909, has 



37 A. L., Jan. 4, 1908, pp. 27, 55. 

38 See Business and Lumber Trade Conditions, No. 33, Nov. 18, 1914, p. 1. 

39 See supra, p. 119. 

40 This question has been thoroughly discussed at each successive tariff hear- 
ing. Volumes of evidence have been submitted to show that the cost of produc- 
tion is greater in the United States; equally convincing statistics to the contrary 
have also been presented. The fact is perhaps an unsettled question. Whatever 
difference exists, however, is not, on the average, a substantial one. 



THE INFLUENCES 123 



been $2.00 per M feet on lumber, has substantially affected neither im- 
ports nor prices, has been shown in Chapter I. Certain border mills only 
have been able to compete in American markets. Moreover, large quan- 
tities have been imported from the United States. 41 The per capita lum- 
ber production in Canada in 1909 was 468 feet; in the United States 
484 feet. 42 

Average stumpage prices in British Columbia have been slightly 
lower than corresponding prices in the Pacific Northwest. In neither 
territory, however, until about 1900, have the prices of standing timber, 
as an item of cost of production, been of any considerable consequence. 
Nor is there evidence that in the Ottawa Valley and in the eastern 
Canadian forests the Canadian manufacturer has had any appreciable 
advantage in respect to this item of cost. An investigation by the De- 
partment of Commerce, in 1914, of conditions in the lumber and shingle 
industry in the Pacific Northwest showed "that there is practically no 
difference in the cost," i. e., of production, as compared with the cost 
to Canadian mills. 43 

Significance of Canadian Lumber Price Movements. 
The timber resources of Canada have never been "cruised" and cur- 
rent estimates have varied. If on a conservative basis the remaining 
supply be placed at one trillion feet 44 or at about one-third of the remain- 
ing stand of merchantable stumpage in the United States, it is obvious 
that the degree of exhaustion in Canada as a whole has been considerably 
less than in the United States. For example, the production of lumber 
in Canada equalled, in 1909, only 8.6 per cent of that of the United States. 
Assuming 10 per cent as the average relation, it is apparent that the 
United States has been cutting ten times as much lumber from a total 
timber supply less than three times as great. The relative exhaustion in 
the United States has therefore been increasing at a rate more than three 
times as fast as in Canada. Costs of production have increased, but the 
relative increase, as has been seen, has been almost identical in the two 
countries. 

There has been, moreover, no evidence that artificial interference 
in Canada with the operation of natural influences has perceptibly affected 
prices. A few isolated attempts at combination in restraint of trade in 
lumber have been uncovered by the Dominion courts. None have had 
any success. Nor has any part of the rise in lumber prices been ever 
authoritatively attributed to such artificial influences. Nor has any influ- 
ence not also operative in the United States been proposed to account in 
whole or in part for the great advance of lumber prices in Canada. 

Prices in the United States and Canada compared. Nevertheless, 
the course of Canadian lumber prices since 1890 has been almost identical 
with the contemporary lumber price movements in the United States. 



41 Kg., 1909, 119,548 M feet; 1910, 176,736 M, and 1911, 392,733 M feet. 

42 See supra, p. 26. 

43 Special Report, Bur. of Cor., Feb. 16, 1914, p. 33. 

44 Zon, R., in Forest Resources of the World, p. 16, estimates 360 billion feet. 
This is, however, absurdly low as it covers only 280,000 square miles or less than 
one-fifth of the actual forest area of Canada. 



124 THE ORGANIZATION OF THE LUMBER INDUSTRY 

See Appendix IV. For example, the relative prices of lumber in the 
United States and Canada have been as follows : 45 

1890 1897 1900 1907 1911 1912 

United States 84.1 77. 94.5 137.2 135.8 140. 

Canada 84.9 77.1 93.6 135.6 135.5 136.4 

The difference also between relative lumber prices and general 
prices, i. e., the range of peculiar lumber price phenomena, has been 
almost equal in the two countries. General commodity prices are com- 
pared as follows: 46 

United States 101.1 80.3 99. 115.9 115.6 119.4 

Canada , 101.4 84.7 99.5 115.9 117. 123.4 

Thus the relation of lumber prices to general commodity prices has 
been practically identical in the United States and in Canada. Analogy 
to Canadian price phenomena constitutes strong presumptive evidence 
that natural causes, of which much the most influential has been the 
relative exhaustion of timber supply, are an adequate explanation of 
the lumber price movements in the United States for the period for 
which statistics have been presented, 1880 to 1912. 

Analogy to Canadian export prices. Further confirmation is to be 
found in the record of export prices of Canadian square timber. 47 Not 
only has the increase been continuous, but it has exhibited a wide range 
of relative increase as between different grades of product. The relatively 
greater reduction in the supply of high grade timber is manifest in the 
higher percentage of increase in its price as compared with that of the 
lower grades. The following table 48 shows not only that the annual 
relative rise in price since 1880 has not been greater than that between 
1850 and 1880, but that it has, in fact, been less. Neither general in- 
fluences affecting all prices during this period nor any assumption of 
artificial restraints can account for these phenomena. 49 

TABLE 10 

(cents per cubic foot) 
White pine Oak 

Year 

1850 4 to 5.5 13 to 14 

1860 5.5 to 10 14 to 17 

1870 8.5 to 18 19 to 23 

1880 14 to 36 43 to 52 

1890 18 to 35 42 to 49 

1894 16 to 42 45 to 51 

Increase 12 to 36 32 to 37 

Per cent increase per annum approximately 7 to 15 5 to 6 

45 The base price (100) here is the average price for the three-year period, 
1901 to 1903, as used throughout this study. 

46 For complete index for the period 1890 to 1912, see Appendix IV, p. 151. 

47 Exported chiefly to England where lumber prices have long been notably 
high. 

48 Data from Forest Wealth of Canada, quoted in Fernow, B. E., op. cit, 
p. 459. 

49 During the period 1878 to 1893 the prices of white pine logs exported from 
Ontario to the United States increased from $5.40 to $8.33 or at the average annual 
rate of 3.6 per cent. This was a period of declining general prices. 



THE INFLUENCES 125 



Analogy to Prussian Prices. 
An exhaustive analysis of the historical movements of prices of 
wood and of agricultural products in Prussia covering the period 1830 
to 1880 has been made by Dr. Fr. Jentsch. 50 His investigation revealed 
the following facts : 

1. The prices of agricultural products and of wood have 
tended to rise. 

2. The rise in wood prices has been more continuous and 
more extensive than that in agricultural products. 

3. Wood prices promise to rise indefinitely. 

These observations have concerned the general commodity, wood. 
The price tendencies in Prussia of the specific wood product, lumber, 
have been much more pronounced. Indirectly, Prussian experience has 
confirmed the validity of the principle of lumber price fixation derived 
above from the analogy between the statistics of lumber prices in the 
United States and in Canada. 



50 Zeitschrift fur Forst-und Jagdwesen, 1887, pp. 91-108. 



126 THE ORGANIZATION OF THE LUMBER INDUSTRY 



CHAPTER VII. 

THE INFLUENCES WHICH HAVE AFFECTED THE PRICES 

OF LUMBER: SUBSTITUTION AND ASSOCIATION 

ACTIVITIES. 

Substitution of Competing Materials. 
Not only has there been keen competition, for most uses, between 
different species of lumber in the same markets, but also between lumber 
and substitutes for lumber. The diversion of demand from one species 
of lumber to another implies no necessary change in general lumber 
prices. Its transfer, however, to a substitute material thereby tends 
to diminish the total demand for lumber as balanced against the total 
offering of it upon the market and therefore the price. 

Definition of Substitution. 
Substitution, as conceived in this study, means not a physical 
diminution in the total uses of lumber at one period compared with a 
previous period. It means a relative diminution, i. e., a smaller total 
of uses at any time as measured by the current demand for lumber, 
than there would have been had the proportional distribution of demand 
among competing materials remained the same as it had been at a 
former time, with which present conditions are being compared. 1 The 
first meaning, i. e., signifying an actual quantitative diminution in the 
total uses for lumber, seems to have been that adopted by Fernow in 
the assertion: 2 

"Whatever the reasoning regarding the possible substitution of 
other materials for wood, the historical evidence so far has been 
the other way: new and more extensive use of wood has accom- 
panied the development of these other materials. 

"The increase of wood consumption parallel with the increase 
of consumption of its substitutes, coal, iron, and stone, simply 
accentuates the influence of the great modern industrial develop- 
ment and increase of civilization, which means increase in wants." 

That per capita utilization of lumber has greatly increased has been 
already shown. 3 But that the per capita use of substitutes has in- 
creased may be demonstrated with equal conclusiveness. 

Substitute Building Materials. 
Since building and general construction uses have comprehended 
nearly three-fourths of the average annual output of lumber, it is there 
that substitution has exercised the greatest influence upon the total 

1 At least that the proportion of demand going to lumber shall not have 
decreased. 

2 Economics of Forestry, 1902, p. 424. 
8 See supra, pp. 26, 27. 



THE INFLUENCES 127 



demand for lumber. That the per capita use of substitutes in the United 
States, during the period of rising lumber prices, since 1896, has in- 
creased much more than the per capita consumption of lumber is appar- 
ent in the following diagram: 4 

The annual product of building stone has nearly doubled in value 
since 1900; that of crushed stone has increased 340 per cent. 5 Statistics 
collected by the Forest Service show that the consumption of box lum- 
ber between 1907 and 1910 had declined 15 per cent; 6 that about 10 
per cent of the shipping boxes manufactured in 1911 were of fiber, and 
that 

"the wooden box is not quite holding its ground," 7 
in competition with fiber. 

Influence of Substitution Upon Prices. 
Increasing substitution of other materials may have affected the 
lumber market in two ways: 

First, it may have tended to cause a decrease in the amount 
offered for sale, leaving the ratio of demand to supply, and tending 
therefore to leave the price also unchanged. 

Second, it may have tended to decrease the price by decreasing 
the total demand for lumber, but not the supply in equal proportion. 

The exercise of an influence of the first type would not have been 
the cause of a decline in prices. Its indirect influence would have been 
in the direction of lower prices because of the decrease in the current 
demand upon the resources of standing timber, 8 and because of the 
cumulative effect of such savings in lessening the degree of exhaustion 
of those sources from which the current supplies of lumber have been 
drawn. The second effect, however, has tended directly to lower prices 
by diverting the demand. 

Diversion of demand since 1907. It is considered by many manu- 
facturers 9 that the slow recovery of general lumber prices since the fall 
of 1907 has been largely due to the inability of the lumber market to 



4 The data include domestic production plus imports. Exports have been 
deducted. Sources : Annual bulletins of U. S. Geological Survey : The Cement 
Industry in the United States; The Production of Sand and Gravel; Statistics of 
the Clay-Working Industries ; The Stone Industry. American Iron and Steel 
Association [Institute] Annual Statistical Reports. 

Key: Each vertical space represents: 
Cement, 5,000,000 barrels. 
Structural steel, (and iron), 200,000 tons. 
Glass sand, 200,000 tons. 
Common brick, 2,000,000 thousands. 
Front brick, 200,000 thousands. 
Vitrified brick, 200,000 thousands. 

5 The Stone Industry in 1912, pp. 10, 11. 

« For. Ser. Circ. 177, Wooden and Fiber Boxes, 1911, p. 11. 

7 Ibid., p. 13. It is not true, as many lumbermen and box manufacturers have 
asserted, that the increasing use of fiber has caused a decrease of 30 to 40 per 
cent in the demand for wood boxes, p. 5. 

* See supra, p. 23, note 81. 

* E. g., see Appendix V, p. 152. 



128 THE ORGANIZATION OF THE LUMBER INDUSTRY 



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DIAGRAM 21. 
Consumption of Substitutes for Lumber in the United States. 
(Scale: Each vertical division (see marginal index) represents: cement, 5,000,000 
barrels; structural steel, 200,000 tons; glass sand, 200,000 tons; vitrified brick, 200,000 
thousands; common brick, 2,000,000 thousands; front brick, 200,000 thousands.) 



THE INFLUENCES 129 



regain that part of the demand which has been diverted to competing 
substitutes because of the high lumber prices prevailing during the period 
1905 to 1907. The precise range of price phenomena due to increased 
substitution is, of course, incapable of isolation. That its influence has 
however been recognized as an important factor by the lumber trade is 
a presumptive indication of its probable past effect upon prices. 10 Un- 
doubtedly the still greater potential increase in substitution has been 
a deterrent influence upon the prices of lumber for certain specific uses 
in which the slack permitted by the competition of other materials has 
been already entirely, or approximately, absorbed. At a higher price, 
the demand for lumber would have been to a greater extent or, in some 
cases, entirely, diverted to competing materials. 

Organized Artificial Restraints Upon Competition. 
The type of manufacturers' organization and the general policy of 
co-operation has been described in Chapter III. Economies due to the 
great technological improvements in the processes of lumber manu- 
facture from stump to market, balanced against the increase in cost 
of labor and of equipment, have resulted in a great net increase since 
1894, in the cost of production per unit of output (exclusive of the 
cost of stumpage). A similar increase in costs has, however, character- 
ized, in general, all other industries. 

In the investigation of "Wages and Prices" by the United States 
Senate in 1911 it was reported: 100 

"It is not to be denied that aside from all other causes the 
cost of lumber has been increased by the diminishing supply of 
standing timber, but it is equally true that, as in the case of the 
farmer, so in this case of lumbermen the cost of the product has 
been largely increased by the enormous increase * * * on al- 
most all articles used by him in the prosecution of his business and 
in the clothing and supplies needed by himself, his family, and 
employees." 

The increase in the unit cost of lumber production has been classi- 
fied 11 above as a result of a universal influence affecting general prices; 
not, therefore, as an explanation of that part of the increase of lumber 
prices which has been over and above the increase in general prices. 

Natural Influences Adequate Explanation of Prices. 
Neither taxation of timber nor the tariff has had substantial effect 
on average lumber prices. Nor have there been, since 1880, any con- 
siderable increases of wide application in lumber freight rates. As 
respects transportation costs, the increases in lumber prices have been due 
to the great continuous increase in the proportion of the lumber output 
taking the higher rates (i. e., from distant sources) ; not to changes in 

10 For relative prices since 1890 of substitute building materials, see App. IV. 
10 o61 Cong., 3 Sess., 1911, S. D., Vol. 63, No. 847, Investigation of Wages 

and Prices, Vol. I, p. 148: minority report. 

11 See supra, p. 2. 



130 THE ORGANIZATION OF THE LUMBER INDUSTRY 

the rates themselves. As an influence, distinct from general relative ex- 
haustion of supply, tending to raise lumber prices, concentration per se 
in timber holding in certain regions has not been effective in the past, 
either directly or indirectly. It is, however, a powerful potential factor, 
the true significance of which is dependent upon future exigencies of the 
timber supply. 

Educative activities within the industry have resulted in more uni- 
form prices and probably in a slightly higher average level. Any such 
increase has been due, however, to the better bargaining ability of the 
well-informed seller of lumber as contrasted with that of the owner 
of lumber who is unacquainted with current market conditions. The 
relative exhaustion of timber supply has been a universal and a continu- 
ous influence upon the prices of lumber. The phenomena of high prices 
and of diminished supply of timber in the United States have been so 
correlated as to reasonably indicate a causal connection. By comparison 
with Canada and with other countries, and by analogy to other periods in 
the history of the industry in the United States, the explanation of the 
peculiar extent of the relative rise in lumber prices since 1880 has been 
found in natural causes, i. e., in factors beyond the control of producers 
or of associations of producers. The task yet remains to show that the 
organized activities, as such, of lumber manufacturers, aside from the 
legitimate exercise of their educative functions, have had no substantial 
effect in the direction of higher wholesale prices. 12 

General Restraint Upon Competition Impracticable. 
There have been five primary objective conditions preventive of 
general restraint upon competition in the wholesale distribution of lum- 
ber: 

1. Wide geographical distribution of raw material; 13 

2. Scattered ownership of timber; existence of many small 
holdings. 14 

3. Large scale production, i. e., in very large plants, not the 
basis of most economical adjustment of productive factors. 15 

4. Actual and potential competition among different species 
for nearly all uses to which lumber has been devoted. 16 

5. Actual and potential substitution of other materials com- 
peting for the same uses. 17 

Certain psychological influences have also tended to make ineffective 
any general attempts at such co-operation. The lumberman's traditional, 
and perhaps partially sentimental, interest in the technology of produc- 

12 It is recalled that the scope of this study does not extend to retail distri- 
bution. 

18 See supra, pp. 26, 27. 

14 See supra, pp. 84' to 87. 

16 See supra, pp. 39, 40. 

18 See supra, pp. 41, 42. 

1T See supra, pp. 126, 127. 



THE INFLUENCES 131 



tion rather than in the details of marketing; mutual distrust engendered 
by the violation, by some, of principles of trade ethics, the "common 
law" of the industry; individual self-reliance as expressed in indepen- 
dent action, believed to best promote individual interests — these factors 
have discouraged effective joint action in respect to the distribution of 
lumber. To a great extent such subjective factors have now been elimi- 
nated. For this the educative activities of the trade journals and of 
the associations themselves have been primarily responsible. 

Erroneous interpretation of price phenomena. Many manufac- 
turers, prominent in association activities, have aspired to a type of 
co-operation among lumbermen, sufficient to dominate the lumber in- 
dustry. 18 Associations have campaigned vigorously for increased mem- 
bership. Extravagant, fanciful claims as to the results attributable to 
joint action have been offered as inducements. For example, a large 
yellow pine manufacturer, commenting on the effect upon prices of a 
curtailment of production during the latter part of 1904, attributed the 
observed result wholly to the influence of organized activities by the 
association : 

«* * * j n ma ki n g mv calculations as to the saving that 
this curtail movement has effected to my company, * * * [I found 
that] we obtained about $145,381 more for our shipments between 
July 1 and January 1, and that our stock on hand at our mills and 
in our retail yards was worth about $11 5, (XX) more than it would 
have been worth January 1 in the absence of this movement, making 
a total saving to the company of $260,381 * * * " 19 . 

In this statement is a begging of the question in three important 
particulars : 

1. In the original assumption that the curtailment, which had af- 

fected supply only, was the sole cause of the subsequent rise in 
prices. 

2. In the implication that the curtailment had been the result wholly 
of joint action as contrasted with otherwise individual action. 

3. In the inclusion of the increase in value, based on present prices 
of unsold yard stock, as a part of actual savings. 20 

West Coast Lumber. An extraordinary claim in behalf of the asso- 
ciation activities of West Coast manufacturers was expressed in 1904 
in the assertion that to such activities had been directly attributable : 

"* * * upward of $10,000,000 during the past four years, over 
and above what they could have made in a disorganized state, even 



is Minneapolis Journal, Nov. 27, 1908; N. Y. L. T. J., May IS, 1908; p. 11; 
same, July 15, 1908, p. 13; A. L., June 22, 1907, pp. 46 ff. 

19 Southern Lumber Manufacturers' Association, annual meeting, New Orleans, 
January, 1905, address of president : N. O. L. T. J., Feb. 1, 1905. 

20 The fact that a certain price has been secured for the stock actually sold 
does not imply that the stock remaining, subject to sale in the future at whatever 
prices then prevail, represents a present profit computed on the basis of present 
prices. In fact, if the manufacturer had offered for sale his entire stock instead 
of a part of it, it is probable that he would have secured a lower price for all. 



132 THE ORGANIZATION OF THE LUMBER INDUSTRY 

under the most favorable conditions. * * * [This had been 
achieved at a cost of $23,000] yet we have been told at times 
when, on account of over-production, floods, crop failures, or other 
unforeseen causes, prices were weak, that the associations were 
of no earthly account and that their price lists were a farce/' 21 

It is interesting to note that, despite the joint activities of the associ- 
ations, fir prices, during one year ending with the second quarter of the 
same year, 1904, declined 26.4 per cent. See Diagram 13. 

Again in 1906 it was claimed that association activity had been the 
cause of a gain to members, during 1905, of $5,264,250 at an expense 
of only $10,874.09. 22 By referring, however, to Diagram 13, it will 
be noted that during 1905 the prices of all species greatly increased, 
irrespective of the connection or of the lack of connection with strong 
organization. The prices of Lake States hemlock, for example — the hem- 
lock association's price activities were then conspicuously ineffective- — 
increased with equal rapidity and those of North Carolina pine increased 
much more rapidly than did fir prices. 

Fallacious assumption respecting prices. In these extravagant state- 
ments, the same fallacious assumptions are in evidence. Coming from 
sources of presumably competent judgment, such claims, however un- 
substantiated in fact, cannot but have provoked an impression among the 
public, unconversant 220 as it has been with the organization of the lum- 
ber industry, and sharing neither the optimism nor the trade aspirations 
of prominent association officials, that the recent rapid relative increase 
in lumber prices has been due to a monopoly control of lumber supply. 23 
The reason why such statements have been made is, of course, plain. 
They have been based, however, upon an assumption the fallacy of 
which is unquestionable, namely, that except for the association activities 
lumber prices would have either remained stationary or would have 
fallen. 

Association Price Activities Not a Substantial Influence. 
In the report by the Department of Commerce 24 on the investigation 
of competitive conditions in the lumber industry, it has been asserted 
that 

"association price lists, and the so-called 'individual' price lists 
which were formulated at conferences of lumbermen 'acting as in- 
dividuals,' have had and do have an important effect on the actual 
sale prices of lumber * * *." 25 



21 Organization in the Far West ; in M. V. L., Jan. 22, 1904, p. 74. 

22 Official Circular dated Feb. 21, 1906; see P. C. L. T. J., Nov., 1905, p. 11. 
22 o Official Report, Tenth Annual Convention, Nat. Lum. Man. Assoc, 1912, 

pp. 37, 38. 

23 The Lumber Industry, Pt. IV, p. 19. 

24 Lumber Industry, Pt. IV, p. 12; also xvii. This refers to manufacturers 
lists. A partial qualification is later made: "The condition of increasing demand 
and decreasing supply has given great strength to the lumbermen's efforts to 
reduce competition and arbitrarily fix prices." Ibid., p. 20. 

26 Italics not in original text. 



THE INFLUENCES 133 



In their bearing upon this statement which refers to the period cov- 
ered by the investigation, i. e., 1896 to 1910, the following facts are sig- 
nificant, which have been shown in this study : 

First, natural influences, beyond the control of association activ- 
ity, have been the cause of even greater relative increases in prices 
in the past; also of increases, since 1896, in Canada, which have 
been as great as those in the United States during the same period. 
Natural influences are, therefore, by presumption and by analogy 
an adequate explanation of the relative increase in lumber prices 
as compared to general prices in the United States since 1896. 

Second, as has been shown in Diagram 1, the relative increase 
of lumber prices as compared to general prices, began in 1880, 1881 
and not in 1896, 1897, as has been assumed by the Department of 
Commerce. 

Third, the rate of such relative net increase during the period 
1880 to 1896 was greater than during the period 1897 to 1910. Dur- 
ing the former period, however, there were few associations. 26 
Price list activities and efforts at organized curtailment of produc- 
tion were then practically unknown. 27 

Fourth, the differences between the price movements, since 1896, 
of different species are capable of explanation without resort to 
the assumption of the artificial influence of joint action. 28 

Fifth, association price activities have not prevented rapid and 
extensive decline in prices, especially in 1900, 1903-4 and 1907-8. 
See Diagram 13. 

Sixth, the sharpest decline in many cases has been in the prices 
of those species, which have been supported by the strongest organi- 
zations, i. e., the members of which have controlled the largest 
percentage of the output of the species. 29 

Seventh, list prices have been almost invariably, and often 
greatly, higher than the prices at which actual sales have been made. 
List prices have prevented actual prices neither from falling lower 
nor from rising higher. 30 

Eighth, no concrete instances have been cited of the success- 
ful maintenance of attempted arbitrary price increases where such 
increases have been obviously not justified by natural competitive 
conditions and dependent therefore, wholly upon the arbitrary con- 
trol of the supply. 



26 See supra, p. 52. 

27 Before the organization of associations there had been occasional price 
agreements to which a small number of mills were party. These were short-lived, 
very limited in influence and almost uniformly unsuccessful in the attempted main- 
tenance of prices agreed upon. Among certain fir manufacturers such an ephemeral 
agreement existed as early as 1891. M. V. L., Apr. 24, 1891, p. 9. 

28 See supra, pp. 120 to 122. 
28 See supra, pp. 52 to 55. 

80 See supra, Diagram 3, p. 19. 



134 THE ORGANIZATION OF THE LUMBER INDUSTRY 

Ninth, there have been many instances of complete failure of 
such attempts. 31 

Tenth, a large proportion of the lumber output has been the 
product of both large and small mills outside of the associations, 
and also of many association mills which have sold lumber at 
prices lower than "list," either voluntarily or because of financial 
pressure. 32 The proportion of the output manufactured by these 
mills has been sufficient to compel other association mills to meet the 
lower prices, 33 in order that they might fairly share in the business. 
The more has this been true since, in general, such mills have had a 
surplus capacity, which would have enabled them to greatly increase 
their output in case the association mills had refused to meet their 
prices. 

Eleventh, the investigation has covered only a period of gener- 
ally rising prices. No comparison has been possible therefore with 
price phenomena of a period of declining actual prices. 34 

In the interpretation of association activities a distinction is ob- 
served between those which have been purely educative and those form- 
ally attempting the maintenance of certain agreed prices. Individual 
activities also are to be distinguished from those activities which are 
practicable only by co-operative action. 

Arbitrary Increases Unsuccessful: Poplar. Theoretically the main- 
tenance of an arbitrary price increase depends upon the degree of con- 
trol of supply and the availability of substitutes. 

If the general level of lumber prices has been raised by artificial 
joint action, such effect has been the result of an adequate degree of con- 
trol over the supply, not of a particular species only, but of other species 
also with which it has competed in common markets. In 1902 the Yel- 
low Poplar Manufacturers' Association was organized at Lexington, 
Kentucky; later in the year it was absorbed by the Hardwood Manu- 
facturers' Association of the United States. 35 For certain uses many 
other species competed with poplar; for others few. At its organiza- 
tion the association of poplar manufacturers claimed that its membership 
controlled 90 per cent of the poplar output of the United States. On 
September 15, 1903, the Hardwood Manufacturers' Association arbitrar- 
ily raised poplar list prices from 2 to 9 dollars per thousand feet on items 
of which the previous normal prices had ranged from 22 to 45 dollars, 
f. o. b., Ohio River. The prices of actual sales however, not only did 



si N. O. L. T. J., Feb. 15, 1899, p. 16; Minutes of Annual Meeting, 1907, of 
Northwestern Hemlock Manufacturers' Association: M. V. L., Oct. 2, 1908, p. 38. 

33 See supra, pp. 84 to 87. 

33 E.g., M. V. L., Aug. 30, 1907, p. 22: "It is a well-known fact that the 
yellow-pine market has been decidedly unstable even at times when the demand 
for lumber has been the greatest. * * * As is the case with southern pine, 
its production [hemlock] is very largely in the hands of those who are either 
financially unable to hold their lumber for its true value, or who seem incapable 
of appreciating what it is worth. The small manufacturer sets the pace which 
must be followed to a certain extent." 

"The Lumber Industry (Pt. IV, p. xviii) ; Pt. I, p. xvii. 

3« N. Y. L. T. J., Feb. 15, 1903, p. 14. 



THE INFLUENCES 135 



not respond to the attempted increase, but immediately declined. The de- 
cline continued until the beginning of 1905. Meanwhile the nominal list 
prices, ranging from 5 to 14.50 dollars above actual prices, were main- 
tained until January 27, 1905, when the association lowered the list more 
than they had previously raised it. Not again until 1908, was it increased 
to the level attempted in 1903. 

The current trade comment on this adventure is significant: 

The recent advance of $9.00 a thousand in prices of clear pop- 
lar by the manufacturers of the Ohio River district, does not ap- 
pear to have been followed here. — Chicago, A. L., Sept. 26, 1903, 
p. 57. 

There are only three contingencies that can reduce the con- 
sumptive demand for poplar — a constricted money market, exces- 
sive or prohibitive prices and substitution. We have assurance 
from a high official source that our national finances are in a fairly 
healthy condition. The price list adopted by the association is not 
prohibitive and the substitution of other woods for poplar has 
already been carried to about the limit. — S. L., Oct. 1, 1903, p. 9. 

The high prices have not materialized as yet and orders are 
being freely taken at the old list.— Boston, A. L., Oct. 17, 1903, 
p. 60. 

The advanced prices * * * are not obtaining in all current 
sales.— New York, S. L., Nov. 1, 1903, p. 28. 

Producer and buyer agree that the Buffalo market will not pay 
the advance.— Buffalo, S. L., Nov. 28, 1903, p. 61. 

The one really off-color wood is poplar, and all because the 
effort to jump up the price $8 or $10 has been repudiated by the 
trade pretty generally.— Buffalo, N. Y. L. T. J., Jan. 1, 1904, p. 32. 

It is a fact that Buffalo at least is using much less poplar than 
it used to.— Buffalo, A. L., Nov. 19, 1904, p. 55. 

Poplar which has steadily refused to make any rises after the 
hard setback which it received a few years ago when the $8.00 
change was announced shows a tendency to stiffen in price. — Pitts- 
burgh, N. Y. L. T. J., Nov. 15, 1905, p. 24b. 

Strategically no better situation for the maintenance of an arbitrary 
advance in lumber prices could have been conceived than that which had 
faced the poplar manufacturers. There had been a shortage, both of 
logs -and of lumber. 36 The manufacturers curtailed production; they 
exported large quantities 37 at lower prices. They used practically all 
known devices to maintain the "list." Nevertheless, substitution in- 
creased; the prices fell. The attempt was a complete failure. 

3« S. L., Dec. 15, 1903, p. 8. 
37 A. L, Apr. 30, 1904, p. 55. 



136 THE ORGANIZATION OF THE LUMBER INDUSTRY 

The Michigan Maple Co. Although maple lumber has come from 
practically every lumber-producing state, more than one-half of the cur- 
rent output since 1901 has been manufactured in Michigan. In that 
year was organized the Michigan Maple Co., a selling agency estimated 
to control 85 per cent of the State's product. 38 The following comment 
shows the movements of the price of a single special high grade item, 
maple flooring, in the hands of a strong organization: 

Those familiar with the hardwood business know that for a 
long time maple lumber has been in a depressed condition, seldom 
commanding the prices warranted by those obtaining for other and 
competitive woods. — Grand Rapids, A. L., Oct. 26, 1901, p. 28. 

There has been a hardwood association in Michigan, but it 
did not solve the maple problem. — A. L., Feb. 8, 1902, p. 11. 

There are still reports of maple selling low in spite of the com- 
bine to put it up.— Buffalo, A. L., May 17, 1902, p. 47. 

Maple flooring is reported off in price, with rumors of cut- 
ting constantly confirmed. — Boston, A. L., July 12, 1902, p. 51. 

The situation in maple flooring is far from satisfactory. It is 
claimed that there are few sales at the list and that mills outside 
the association are securing all the orders. — Boston, ibid., Jan. 10, 
1903, p. 51. 

Maple flooring has gone to pieces and it is impossible to quote 
current prices as they vary so much. — Boston, ibid., Feb. 21, 1903, 
p. 57. 

Maple flooring is selling in excellent volume with several of 
the manufacturers and prices are being shaded from $1 to $3. — Chi- 
cago, ibid., Aug. 1, 1903, p. 53. 

Maple flooring manufacturers still complain of light prices and 
jobbers agree that they can buy flooring in some instances at about 
$5 off the list price.— Buffalo, ibid., Apr. 16, 1904, p. 65. 

All the advances made in price recently are holding well, ex- 
cept that in maple flooring, which seems not to have been warranted. 
—Philadelphia, ibid., Sept. 30, 1905, p. 53. 

It is unlikely that any association has been in a position more strate- 
gic for the maintenance of an arbitrary advance in prices than have 
been the manufacturers of poplar or of maple flooring. 

List Prices and Actual Prices Compared. 

Southern Yellow Pine. The vehicle of association price activities 
has been the price list, under whatever nominal title. 39 List prices have 
been almost invariably higher than actual prices. During periods of 

38 A. L., Nov. 3, 1906, p. 40. 

89 "Official price list," "standard price list," "prevailing prices," "market report," 
"ascertained prices," "basis list," etc. 



THE INFLUENCES 137 



rising prices the latter have occasionally overtaken the "list" before a 
further advance has been agreed upon. See Diagram 3. The same 
phenomena have characterized the prices of all species for which lists 
have been issued. The average difference between "list" and actual prices 
has varied with association policy and with differences, as between 
species, in the conditions of production and of distribution. In Dia- 
gram 22, the list prices of three typical items of yellow pine common 
lumber are contrasted with actual prices. The base lines represent the 
respective actual sales prices, the curves the disparity between such 
prices and "list" in dollars per 1,000 feet. Only where both prices for 
the same month have been available has the comparison been recorded. 40 
The curve does not therefore illustrate historical price movements by 
years. It shows by direct comparison of "list" with actual prices that 
the former have been almost uniformly higher. 41 Exceptions to this 
rule have occurred during periods of rising prices of lumber of all species 
irrespective of the presence or the absence of strong association price 
activities. 

The maximum disparity here shown between actual prices and list 
prices is 27.1 per cent of the former. 

Northern Pine and Douglas Fir. Because nearly one-half of the 
annual production of softwood lumber consists of yellow pine, the fail- 
ure of southern manufacturers to maintain list prices, is especially sig- 
nificant. Southern pine has competed with all other softwood species 
in a wide range of common markets. If the level of yellow pine prices 
has not been artificially raised by joint activity through the associa- 
tions, the presumption is that the prices of the species with which yel- 
low pine has competed have not been substantially increased by arbi- 
trary influences. 

Of the important softwood species reviewed in this study, Douglas 
fir has been relatively the most plentiful; white or northern pine the 
most exhausted. The limited supply of white pine lumber compared 
with the demand for it has rendered the position of the manufacturer 
of white pine the most strategic in the soft wood industry as respects 
the conditions of maintenance of agreed prices. 42 Although, therefore, 
the disparity between list prices and actual prices has been less than 
in the case of other species, the range of difference has nevertheless 



40 Thus in 1896 for only one month were both list and actual sales prices 
found for A ; in 1899 for nine months. The broken line indicates that the two 
quotations have not been available. 

41 A., 1908, list price, $15.25 ; actual price, $12. 
Legend : 

A — No. 2 Common dimension ; list prices 2"x4"xl6' ; invoiced mill deliveries, 
2"x4"14'-16' ; range of actual prices 1897, 1907, 1910, $8, $20, $16, respectively. 

B— No. 1 Common, l"x4' / ; range of prices, $11, $25, $19. 

C — No. 2 Common boards; list prices, I"xl2"xl6'; invoiced mill deliveries, l"xl2" 
xl2'xl6'; range of prices, $10, $21, $17. 

42 The price lists issued by or for the northern pine manufacturers have usually 
been based on a careful canvass of market conditions, available stock and demand. 
Aside, therefore, from possible compulsory administrative features these lists have 
been in effect indistinguishable from other educative activities of the association. 
See A. L., Sept. 3, 1904, p. 26; same, May 13, 1905, p. 70; same, Sept. 23, 1905, p. 25. 



138 THE ORGANIZATION OF THE LUMBER INDUSTRY 




DIAGRAM 22. 
Comparison of List Prices and Actual Sale Prices of Southern Yellow Pine Lumber. 



THE INFLUENCES 139 



been large. 43 In Diagram 23 are compared the list and actual prices of 
five items of northern pine common lumber f. o. b., Minneapolis and of 
Douglas fir logs, of the three recognized grades, on Puget Sound. 

The actual prices of northern pine dimension, 6"x6"xl2-16' (not 
shown graphically), did not rise above "list" during the entire period 
1902 to 1910; maximum disparity, 17.3 per cent in 1908; 14.3 per cent 
in 1901. A similar comparison in the case of 2"xl2"xl6 / dimension shows 
a disparity of 13.3 per cent in 1908; in the case of 2"x4"xl2-16' dimen- 
sion one of 17.6 per cent. Only once during the period did the actual 
price of either item exceed the list price. In neither case did this differ- 
ence exceed 1.5 per cent of the actual price then prevailing. 

It is evident that whatever may have been the purpose of the list 
prices issued by or for the associations the prices at which sales of lum- 
ber of all species have been actually made have been, with almost un- 
broken uniformity, much lower than "list." The determination of the 
effect upon lumber prices of organized activities is not concerned with 
the proof that price agreements have been made. That such agreements 
have existed is not in dispute. Nor is it concerned with the degree of 
adherence to such price lists by the lumber manufacturers. The issue 
is : Have the manufacturers, who have declined to sell at less than "list," 
made the sales which have determined the price of lumber? The data 
submitted covering important species are conclusive evidence that the 
average "market price" has been substantially less than "list." As has 
been indicated in the introductory chapter 44 a "range" of prices has 
existed, both above and below the "modal" price, i. e., the price at which 
the bulk of the sales has been made, Sales at "list" and occasionally at 
much more than list have been recorded. These have been, however, 
the abnormalities and anomalies of the subject matter of lumber prices 
with which this study is not concerned. 

43 Furthermore, the association price policy has been conservative. No radical 
increases have been attempted. Indeed, the greatest relative increase observed in 
list prices of northern pine boards during the period 1901 to 1910 has been 5 per 
cent of the immediately preceding prices ; of northern pine dimension, 8 per cent. 
Both of these occurred during a period of rapidly rising general lumber prices. 

Legend : 
1 — No. 1 Common dressed northern pine, I"xl2"xl6': 
2 — No. 2 Common dressed northern pine, I"xl2"xl6' 
3 — No. 3 Common dressed northern pine, I"xl2"xl6' 
A — No. 4 Common dimension, l"x4 — "xl6 — 20'; 
5 — No. 5. Common dimension, l"x4 — "xl6 — 20'; 
6 — Fir logs, flooring; 
7 — Fir logs, merchantable; 
8 — Fir logs, No. 2. 

Comparison : 
1 — Maximum disparity during the period, between actual and list prices, in per cent 
of actual prices, 9.3, in 1904; range of actual prices, 1902, 1907, 1910, $23, $33, 
$35.75, respectively. 
2—12.3 
3— 8.9 
4-10. 
5—13. 
6—20. 
7—23.1 
8—29.4 



n 1904; range, $18.75, $27, $30. 

n 1906; range, $16.50, $23.50, $22.50. 

n 1908; range, $10.50, $18.25, $14.25. 

n 1906; range, 1904, $8.25; 1907, $13; 1910, $7.50. 

n 1904; 17.6 in 1903; range of actual prices, 1901, 1907, 1909, $6.75, $15, $11. 

n 1903; 25. in 1908; range, 1901, $5.50; 1907, $12; 1909, $8. 

n 1903; range, $4; $9, $5.50 (same years). 



See supra, pp. 19, 20. 



140 THE ORGANIZATION OF THE LUMBER INDUSTRY 






f~A | AA A 



^A 



-^AM 



A-^/^A|^A/\| 



6 



\£A 



AA X ^ 




^1101 



<\0l 



1103 



II OH 



1105 



104 



1107 



1108 



J- 5 



ifWrx i rr 




: /^v~" 



v^AAajA 




§ 



I10Z 



1103 



1101 



no5 



not 



M07 



no: 



DIAGRAM 23. 
Comparison of List Prices and Actual Sale Prices of Northern Pine and of Douglas Fir. 

Note: Base lines represent the actual sales prices. The broken lines represent 
the departure of list prices from the prices of actual sales. 



THE INFLUENCES 141 



The Boston Agreement. 
The National Wholesale Lumber Dealers' Association and the East- 
ern States Retail Lumber Dealers' Association in 1899 formed the so- 
called "Boston Agreement." This agreement provided for the classifica- 
tion of the trade into: 

"1. Manufacturers; 2. wholesale dealers or agents; 3. retail 
dealers and other legitimate customers of the wholesale trade." 45 
The chief purpose of the agreement was the remedy of the 
"pronounced and recognized evils from which both branches 
[retailer and wholesaler] are suffering, viz. : 

1. Sales by manufacturers and wholesalers to consumers. 

2. Sales by brokers, agents and commission men to consumers. 

3. Sales and quotations by the so-called retail dealers to con- 
sumers, through agents, and by methods used by the whole- 
saler in soliciting trade from the retailers." 45 

Because of disagreement over the classification of the trade the 
western wholesalers and the retailers' association in 1903 withdrew from 
the "Boston Agreement," the latter officially for "legal reasons." 46 The 
"Boston Agreement," modified by the subsequent "Baltimore" and 
"Pittsburgh Amendments" (providing for certain extensions in the 
classifications), was thereafter adhered to only by the New York State 47 
retail organizations and by the Lumbermen's Club of Boston. 48 Because 
of the classifications of "legitimate" trade and of the devices used in 
their enforcement, suit was later brought by the United States against 
the Eastern States Retail Lumber Dealers' Association. Unfair prac- 
tices and numerous restraints upon trade were uncovered. These, how- 
ever, have concerned chiefly the retail distribution of lumber. 

The Missouri Ouster Suit. 
In 1907 Attorney-General Hadley of Missouri instituted an inquiry 
into the legality of the "price list" or "market report" and of organized 
curtailment of production. Suit was subsequently brought in ouster 
proceedings against twenty-nine companies operating in Missouri for 
alleged violations of the state anti-trust law. In December, 1913, the 
Missouri Supreme Court issued a decree ousting twenty domestic com- 
panies and revoking the license of five others to do business within the 
State. The charges sustained by the court were : 

1. Illegal use of association price list; 

2. Curtailment in 1904 and 1908 to raise prices; 

3. Entering an agreement in 1904, called the "J omt Trade Rela- 
tions Agreement," between members of the Yellow Pine Manu- 
facturers' Association and members of various retail organiza- 



*s N. Y. L. T. J., Nov. 1, 1906, p. 60. 
46 A. L., Mar. 14, 1903, p. 13. 
*7 St. L. L., Mar. 15, 1903. p. 44. 
«A. L., Apr. 11, 1903, p. 16. 



142 THE ORGANIZATION OF THE LUMBER INDUSTRY 

tions. By this the manufacturers and wholesalers agreed to sell 
only to certain "legitimate" retailers, the retailers agreeing 
thereby to buy only from members of the Yellow Pine Manufac- 
turers' Association; 

4. Blacklisting certain retailers, so-called "poachers"; dividing ter- 
ritory; refusing to sell to consumers and co-operative stores in 
carload lots. 

Fines aggregating $436,000 were imposed. Execution was staid 
however, in many cases, on condition of future compliance with the 
law. As a result of the Missouri Ouster decision the Yellow Pine 
Manufacturers' Association has been reorganized under the name of 
the Southern Pine Association: 49 

"It is not proposed to in any manner agree upon prices, nor in 
any manner agree upon curtailment of production, but * * * 
to give information both as to prices and production." 

The plan "is one of business up-lift; * * * it is one of a 
campaign of trade extension, giving close and careful study and 
analysis to the usages of lumber and the purposes for which it is 
adapted, to grading and inspection * * *." 50 

In so far as it involves the influence affecting the wholesale prices 
of lumber, this decision is inconclusive. The evidence and the decree 
indicate not that prices were actually raised by arbitrary action, but 
that the purposes of such action were illegal. That associations have 
frequently aspired to price fixation is beyond question. 51 The substan- 
tial achievement of this purpose, however, has been impracticable. Not 
only has the law intervened as a deterrent, but the fundamental organiza- 
tion of the lumber industry has prevented the accumulation of that de- 
gree of control over supply without which joint action with intent to 
raise prices could not have been effective. 

Static Influence of Joint Action. 
Concerted price activities have exerted a static rather than a dyna- 
mic influence upon actual lumber prices. The bulky nature of lumber 
and the dependence of its market upon the uncertainties of railroad 
transportation, have tended to make an abnormal scarcity of supply in 
certain markets only slowly self-corrective. Under certain conditions 
of the market, therefore, for example where supply has been short and 
substitutes temporarily unavailable, organized action by a group of 
manufactures may have effectively maintained increased prices until 
normal conditions of supply have again prevailed. 52 Because of the 



49 Business and Lumber Trade Conditions, No. 35, Dec. 24, 1914, p. 2. 

50 Ibid., p. 3. 

51 Practically the entire report on this subject by the Department of Com- 
merce has been devoted to evidence that the manufacturers' associations have 
wished to, and have tried to, fix prices and to establish such prices upon the 
market. 

52 Joint curtailment of supply, during periods of low prices for lumber, over 
and above the curtailment that would have been accomplished as the natural 
result of individual action under such conditions, has probably occasioned a 
temporarily higher price, i. e., until normal competition has reasserted itself. For 



THE INFLUENCES 143 



tardiness with which normal competitive conditions have been often re- 
sumed in the lumber industry, such temporary increases may have been 
sufficient in the aggregate to have adequately remunerated the manu- 
facturers for the administration of this department of their joint 
activities. 

That a certain degree of control over the supply of lumber would 
have involved a control over prices — subject to the potential substitu- 
tion of other materials for lumber — has not been in question. Because 
of the fundamental organization of the lumber manufacturing industry, 
as reviewed above, and because of the surplus capacity of the sawmills 
in much of the lumber manufacturing territory of the United States, 
the degree of such control of supply would however, have been neces- 
sarily high in order to have insured the control of prices. 

To such a degree of control it is probable that many lumber manu- 
facturers have aspired, as have manufacturers in other industries. To 
the earnest promotion of this end are doubtless to be ascribed the occa- 
sional extravagant, misleading and obviously unwarranted claims for 
co-operative price activities, as measured by the past prices of lumber. 
Such concentration of control has not however, been even in a measure 
achieved. Greater uniformity of lumber prices and less wide tem- 
porary fluctuations have indeed resulted from association activities. The 
effect, however, upon the general level and upon the historical move- 
ments of wholesale lumber prices, of association activity in promotion 
of higher prices, has not been important. The attribution to efforts 
at organized restraint, of a substantial influence upon lumber prices in 
the United States, finds warrant neither in the conditions of the indus- 
trial organization of lumber manufacture nor in the statistical evidence 
descriptive of its recent history. 



example : "It is perfectly apparent that the policy of curtailment which went into 
effect on July 1 has been of great benefit to the market." A. L., Aug. 6, 1904, 
p. 15. This, however, implies no substantial change in the long-time level of 
lumber prices. 



144 THE ORGANIZATION OF THE LUMBER INDUSTRY 



APPENDIX 

I. SOURCES OF ITEMS CONSTITUTING THE GENERAL 
INDEX OF LUMBER PRICES. 

Numbers on left margin indicate weights allotted to each species. 
Numbers in parenthesis are the total of weights of all species for the 
period. Indented numbers show the weights given to different items, 
in the same or in different markets, within the individual species under 
which they appear. 

I. 1860 to 1865. 
(10) 5 White pine: 

3 Chicago; Merchants' Magazine, Vol. 54, 1866, pp. 106, 107. 
1 clear; 1 common; 1 cargoes. 

2 Albany; ibid., Vol. 52, 1865, p. 397; Vol. 49, 1863, pp. 373, 

374. 
1 clear ; 1 select box ; 1 box. 
2 Spruce, 1" rough boards; Senate Finance Report (Aldrich) 1893. 

2 Oak, white, 1" plain, rough, firsts; ibid. 
1 Hemlock, 1" rough boards, firsts; ibid. 

II. 1865 to 1870. 

(20) 10 White pine (boards) : 

New York; Commercial and Financial Chronicle, monthly. 
1 clear ; 1 merchantable box ; 1 box. 

3 Spruce, eastern; New York; ibid. 

1 Hemlock, boards and planks ; New York (begins 1868) ; ibid. 
3 Southern pine, boards ; ibid. 

3 Oak, white 1" plain, rough, firsts; Sen. Fin. Rep., 1893. 

III. 1870 to 1879. 

(21) 10 White pine: 

1 New York; Com. and Fin. Chron. 
1 clear; 1 merchantable; 1 box. 
1 Bay City; Annual Review of the Manufacture of Lumber 
and Salt in the Saginaw District. 
1 uppers ; 1 common ; 1 shipping culls. 
3 Spruce, eastern; Com. and Fin. Chron. 

2 Hemlock, boards and planks; ibid. 

3 Southern pine, boards; ibid. 

3 Oak, white, 1" plain, rough, firsts ; Sen. Fin. Rep., 1893. 

IV. 1875 to 1887. 

(19) 10 White pine; Sen. Fin. Rep., 1893; Buffalo: 

3 clear, extra, 1" rough boards; 

4 clear, common, 1" rough boards; 
3 culls, 1" rough boards. 

3 Spruce, 1" rough boards, New York; ibid. 

2 Hemlock, Pennsylvania stock, firsts, 1" rough; ibid. 



APPENDIX 145 



3 Oak, white, plain sawed, firsts, 1" rough boards; ibid. 

1 Yellow pine, rough; mill run, f. o. b. mill (begins 1883). 

V. 1887 to 1896. 

(23) 9 White pine: 

3 Buffalo — Tonawanda; N. Y. L. T. J., monthly. 
1 uppers, rough, l"x8" and up x '; 
1 uppers, rough, 4"x8" and up x '; 
1 selects, rough, l"x8" and up x '; 
1 selects, rough, 4"x8" and up x '; 
1 No. 1 barn, rough; 
1 No. 1 culls, rough. 

1 No. 2 barn, rough, "xlO"x'; (1890 to 1896) Buffalo; ibid. 

2 Mill run, f.o.b. mills in Mich., Wise, Minn. 53 Cong., 2 

Sess., Sen. Com. on Fin., 1894, Bull. Nos. 27-30; 
53 Cong., 2 Sess., S. Rep., Vol. 11, Nos. 444-446; 
451, (1887 to 1894). 

4 Yellow pine: 

1 New York; N. Y. L. T. J., monthly. 

Longleaf, heartface siding, 1" to 5/4"x"x'; (1890- 

1896). 
1 Mill run, f.o.b. mills in Southern States (1887 to 1894); 

Sen. Com. on Fin., 1894, Bull. Nos. 27-30. 

2 Hemlock, New York; N. Y. L. T. J., monthly. 

1 merchantable dimension, (1890-1896); 

1 firsts, 1" rough boards, (1887-1890) ; 

1 merchantable boards, l"x "x '; (1887-1889). 

2 Douglas fir: 

1 Portland, Ore., f. o. b. (1894-1896); Dept. of Commerce. 
1 clear v. g. No. 2 flooring, l"x4" or 6"xl0— 16'; 
1 common boards and shiplap, I"xl2"xl2 — 16'. 
1 Mill run, f.o.b. mills in Wash., Ore., (1887 to 1894) ; Sen. 
Com. on Fin., 1894, Bull. Nos. 27-30. 

2 Spruce, eastern; N. Y. L. T. J., monthly. 

1 New York, (1890 to 1896) ; merchantable dimension; 

1 Mill run, f.o.b. mills in Maine (1887 to 1894) ; Sen. Com. 

on Fin., 1894, Bull. Nos. 27-30. 

3 Oak: 

2 New York; white; N. Y. L. T. J., monthly. 

1 firsts and seconds, quartered. 
1 Mill run, f.o.b. mills in Central States (1887 to 1894) ; Sen. 
Com. on Fin., 1894, Bull. Nos. 27-30. 
1 Redwood: quoted annually (April) by Redwood Association, 
San Francisco. 

VI. 1896 to 1910; Dept. of Commerce; Bur. of Corp. 

(24) 7 Southern yellow pine, f.o.b mills, Mo.; (1896 to May, 1907); 

Tex. (June, 1907 to 1910). 
1 No. 1 common boards, dressed, I"xl2"xl2 — 16'; 
1 No. 1 dimension, dressed, 2"x4"xl4 — 16'. 



146 THE ORGANIZATION OF THE LUMBER INDUSTRY 

2 North Carolina pine, f.o.b. Norfolk. 

1 box or No. 4 stock, rough, l"xl2"x '; 

1 No. 3 flat grain flooring. 
4 Douglas fir (and western pine) f. o. b. Puget Sound. 1 

1 No. 2 v.g. flooring, clear, "x "xlO— 16'; 

1 No. 2 drop siding, clear, I"x6"xl0— 16' ; 

2 common dimension, 2"x4"x8 — 16'. 

4 White (northern) pine, f.o.b. Minneapolis. 

1 No. 2 common boards, dressed, I"xl2"xl6'; 
1 No. 3 common boards, dressed, I"xl2"xl6'; 
1 No. 1 dimension, rough, 6"x6"xl2 — 16'; 
1 C-selects, dressed, I"xl2"xl6'. 

2 Hemlock, Lake States, f.o.b. Wausau. 

1 dimension, dressed, 2"xl2"xl6'; 

1 dimension, dressed, 2"x4"xl6'. 
1 Spruce. 

1 West Virginia; "all markets"; dimension, 2"x4"xl2— 14' ; 

1 eastern; Boston; frames, rough dimension, 2"xl0 — 12"x'. 
1 Cypress (1899 to 1910), f.o.b. New Orleans. 

1 selects, rough, I"x4"xl0— 2CK; 

1 firsts and seconds, rough, 2"x "xlO — 20'. 

3 Oak, white and red, delivered in Chicago. 

1 firsts and seconds, plain sawed, 1" rough. 



VII. 1910 to October, 1912; Forest Service, Record (monthly) of 

Wholesale Prices. 

(25) 7 Southern yellow pine, f.o.b. mills. 
2 Louisiana: 

1 No. 1 dimension, S1S1E, 2"x8"— 16'; 

1 No. 1 common boards, S2S, l"xl0"x '; 

1 No. 2 common boards, S2S, l"x8"x '. 
1 Mississippi: same items; 
1 Texas: same items. 

3 North Carolina pine, f.o.b. mills. 

1 North Carolina: 

1 No. 2 flooring, I"x4"xl0— 16' ; 

1 No. 3 flooring, I"x4"xl0— 16'. 
1 Virginia: 

1 box edge, 4/4, under 12" in width. 

4 Douglas fir, f.o.b. mills. 

1 Washington: 

1 No. 2 v.g. flooring, l"x4"; 

1 No. 2 slash, drop siding; 

1 common dimension, S1S1E, 2"xl2"x — 16'. 
1 Oregon: same items. 



1 Because of a substantial similarity between the prices of western pine 
and of fir, and in the absence of a satisfactory series for the latter, the weight 
given to fir is greater than its average importance in lumber production during 
the period would justify. In 1912 western pine contributed 3.1 per cent and 
fir 13.2 per cent of the total product of lumber. 



APPENDIX 147 



1 Western pine, f.o.b. mills. 

1 Idaho: 

1 No. 2 common boards, l"x8"fe-16' ; 

1 No. 1 common dimension, 2"x8"x — 16'. 

1 Washington: same items. 

2 White (northern) pine, f.o.b. mills. 

2 Minnesota: 

1 No. 3 shop, 1J4"x "x '; 
1 No. 3 boards, "xl2"xl0— 20' ; 
1 No. 4 boards, "x "xlO— 20' ; 
1 Mill run. 
1 Wisconsin: same items. 

2 Hemlock, f.o.b. mills, Lake States. 

1 Michigan: 

1 piece stuff, S1S1E, 2"x4"— 16'; 

1 No. 1 boards, SIS, l"x8"— 16'. 
1 Wisconsin: same items. 
1 Spruce, f.o.b. mills. 
1 West Virginia: 
1 frames, merchantable, 3"x4" to 8"x8"xl0— 16' ; 

1 boards, merchantable, I"xl2"xl0— 20'. 
1 Maine, eastern: 

1 frames, merchantable, 9"and under; 24' and under. 
1 Cypress, southern, f.o.b. mills, Louisiana. 
1 selects, 1"; 
1 No.l common, 1"; 
1 No. 2 common, 1". 
1 Maple, f.o.b. mills. 

1 Michigan (hard): No. 1 common, 1"; 

1 Wisconsin (soft) : No. 1 common and better, 1". 

3 Oak, red and white, f.o.b. mills, Indiana. 

1 No. 1 common, 1"; 
1 No. 2 common, 1"; 
1 firsts and seconds, 1". 



VIII. 1912,1913,1914. New York; N. Y. L. T. J., monthly. 

(20) 8 Yellow pine. 

5 longleaf, heartface siding, 1" and 1^4"; 
3 longleaf, B heartface, riftsawn flooring, D&M, l"x3". 
2 White (northern) pine. 

1 No. 2 barn, rough, 1'^xlO"; 

1 uppers, rough or dressed, 1". 

2 Hemlock (base price) : Pennsylvania and West Virginia stock. 
1 Spruce, eastern, cargoes, 6" to 9". 

1 Maple, hard and soft, firsts and seconds, 1". 

3 Oak. 

2 white, rock, mountain or W. Va. stock, firsts and seconds, 

plain sawed, 1"; 
1 white, Indiana, firsts and seconds, quartered, 6" and up 
wide, 10—16'. 



148 THE ORGANIZATION OF THE LUMBER INDUSTRY 

1 Poplar, yellow, firsts and seconds, rough, 7 — 17" wide. 

2 Cedar, red. f. o. b. mills, Washington, clear. 

The relative prices, derived from the above items, constitute the 
quarterly index of lumber prices, referred to the base price, 100, which 
is the average price for the 36 months, 1901 to 1903. 



APPENDIX 149 



II. RELATIVE GENERAL LUMBER PRICES IN THE UNITED 
STATES: 1860 to 1913. 



1860 


40.5 


1861 


45.3 


1862 


49.8 


1863 


67.5 


1864 


87.2 


1865, 3 


81.5 


4 


93.5 


1866, 1 


101.2 


2 


100. 


3 


99. 


4 


97.2 


1867, 1 


94.6 


2 


96.5 


3 


90.2 


4 


78.5 


1868, 1 


81. 


2 


81.7 


3 


79.5 


4 


83. 


1869, 1 


82.8 


2 


82.8 


3 


82.2 


4 


81.5 


1870, 1 


84. 


2 


84.1 


3 


84.4 


4 


83.3 


1871, 1 


87.4 


2 


81.4 


3 


84.8 


4 


97.4 


1872, 1 


94.6 


2 


98.7 


3 


98. 


4 


98. 


1873, 1 


98.2 


2 


98.4 


3 


98.5 


4 


85.4 


1874, 1 


85.4 


2 


83.5 


3 


81.2 


4 


79.6 


1875, 1 


74.8 


2 


74.8 


3 


73. 


4 


72.1 


1876, 1 


69.2 


2 


69.2 


3 


68.4 


4 


68.4 



1877, 1 


71.6 


2 


71.6 


3 


71.6 


4 


71.6 


1878, 1 


72. 


2 


71. 


3 


71. 


4 


70.5 


1879, 


67. 


1880, 


74.6 


1881, 


75. 


1882, 


79.2 


1883, 


88. 


1884, 


80. 


1885, 


77.6 


1886, 


76.9 


1887, 


80 


1888, 


79.5 


1889, 


79.1 


1890, 


77. 


1891, 


76.3 


1892, 


76.8 


1893, 


75.2 


1894, 


70.6 


1895, 


68.6 


1896, 1 


74.34 


2 


71.59 


3 


66.92 


4 


65.36 


1897, 1 


69.1 


2 


65.33 


3 


64.52 


4 


70.96 


1898, 1 


72.46 


2 


72.76 


3 


71.96 


4 


72.85 


1899, 1 


72.31 


2 


78.17 


3 


84.95 


4 


93.54 


1900, 1 


96.78 


2 


95.47 


3 


88. 


4 


84.3 


1901, 1 


87.83 


2 


91.4 


3 


92.15 


4 


92.97 


1902, 1 


95.52 


2 


101.8 


3 


104.16 


4 


105.11 



1903, 1 


107.22 


2 


107.59 


3 


107.19 


4 


105.85 


1904, 1 


103.87 


2 


101.28 


3 


97.48 


4 


100.03 


1905, 1 


103.61 


2 


109.05 


3 


112.65 


4 


120.21 


1906, 1 


126.08 


2 


139.12 


3 


139.17 


4 


140.17 


1907, 1 


141.3 


2 


147.4 


3 


150.32 


4 


140.84 


1908, 1 


124.02 


2 


116.32 


3 


112.21 


4 


121.1 


1909, 1 


131.12 


2 


128.6 


3 


122.51 


4 


128.2 


1910, 1 


130.75 


2 


134.83 


3 


129.57 


4 


129.7 


1911, 1 


131.4 


2 


131.8 


3 


131.5 


4 


128.6 


1912, 1 


130.7 


2 


134.6 


3 


145.3 


4 


144. 


1913, 1 


143.5 


2 


144.9 


3 


139.8 


4 


137.6 


1914, 1 


138.2 


2 


137.1 


3 


133.5 


4 


131.5 



For sources, see Appendix I. 



150 THE ORGANIZATION OF THE LUMBER INDUSTRY 



III. RELATIVE MONTHLY AVERAGE PRICES OF LUMBER 
OF IMPORTANT SPECIES : 1896 to 1910. 

Key to Table 11: 

I. White pine, No. 2 common, dressed, I"xl2"xl6', Minne- 
apolis. 
II. White pine, No. 3 common, dressed, I"xl2"xl6', Minne- 
apolis. 

III. White pine, No. 4 common, dressed, I"xl2"xl6', Minne- 

apolis. 

IV. White pine, No. 1 dimension, dressed, 2"x4"xl2-16', Minne- 

apolis. 
V. White pine, No. 1 dimension, dressed, 2"xl2"xl6', Minne- 
apolis. 
VI. White pine, No. 1 dimension, rough, 6"x6"xl2-16', Minne- 
apolis. 
VII. North Carolina pine, No. 1 flat flooring, Norfolk. 
VIII. North Carolina pine, No. 1 rough boards, l"xl2"x ', Nor- 
folk. 
IX. North Carolina pine, box or No. 4 rough boards, l"xl2"x ', 
Norfolk. 
X. Douglas fir, No. 2 v. g. flooring, clear, 10-16', f. o. b. Puget 

Sound. 
XL Douglas fir, No. 2 clear drop siding, I"x6"xl0-16', f. o. b. 
Puget Sound. 
XII. Douglas fir, common dimension, 2"x4"x8-16', f. o. b. Puget 
Sound. 

XIII. Eastern spruce, rough dimension frames, 2"x3" and 2"x4", 

Boston. 

XIV. Cypress selects, rough, l"x "x 10-20', New Orleans. 

XV. Lake States hemlock, dimension, dressed, 2"xl2"-16', f. o. b. 

Wausau. 
XVI. Douglas fir, common boards, I"xl2"xl2-16', f. o. b. Puget 

Sound. 
XVII. Douglas fir, rough timbers, 10"xl0" and 12"xl2"-32', f. o. b. 
Puget Sound. 
XVIII. Red cedar, bevel siding, "clear", I"x6"xl2-16', f. o. b. Puget 
Sound. 
XIX. Red cedar, bevel siding, I"x6"xl2-16', f. o. b. Puget Sound. 
XX. North Carolina pine, No. 1 rift, 2^" to 3" width, Norfolk. 
XXI. North Carolina pine, No. 3 flat flooring, Norfolk. 
XXII. Cypress, firsts and seconds, rough, l"x "xl0-20 / , New 
Orleans. 

XXIII. Cypress, random peck, rough, 1", New Orleans. 

XXIV. West Virginia spruce dimension, 2"x4"xl2-14', "all mar- 

kets." 
XXV. West Virginia spruce dimension, 9", 10" and 12" widths, 
-20', "all markets." 



III. TABLE 11. RELATIVE MONTHLY AVERAGE PRICES OF LUMBER OF IMPORTANT SPECIES: 1896 TO l»ni 



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APPENDIX 



151 



XXVI. Eastern spruce, rough dimension frames, 2"xl0" and 2"xl2", 

Boston. 
XXVII. Lake States hemlock, dressed dimension, 2"x4"xl6', f. o. b. 

Wausau. 
XXVIII. Southern yellow pine, No. 1 common, dressed boards, 
I"xl2"xl2-16', f. o. b. mills, Mo. to May, 1907; there- 
after Tex. Base prices, respectively, $13.91 and $12.37. 
XXIX. Southern yellow pine, No. 1 dressed dimension, 2"x4"xl4- 
16', f. o. b. mills, Mo. to May, 1907; thereafter Tex. 
Base prices, respectively, $11.18 and $10.78. 
XXX. White and red oak, plain sawed, firsts and seconds, rough, 

1", Chicago. 
XXXI. White pine, C selects, dressed, I"xl0"xl0-16', Minneapolis. 
XXXII. White pine, No. 1 common, dressed, I"xl2"xl6', Minne- 
apolis. 

The figure heading each column is the base price of the item, being 
the average monthly price for the period, 1901 to 1903. 



152 THE ORGANIZATION OF THE LUMBER INDUSTRY 



V. LETTER: CONDITIONS OF LUMBER MANUFACTURE 
IN THE UNITED STATES. 

The only records that are immediately available to me are those 
of the * * * and we have been operating for only about five 
years. During these five years all of our supplies have increased in 
cost — for instance, we were buying beef at 5y 2 c per pound in 1909 
and we have paid as high as 12c per pound for the same quality this 
year. Wages have also advanced during these five years about 15%; 
taxes have about doubled, from which you would conclude that our lum- 
ber costs us more now than five years ago. . This, however, is not the 
case — because these items which have tended to increase the cost of 
manufacturing lumber have been offset by other items which have de- 
creased the cost — these items are as follows : Improvements in our 
machinery and our organization that have increased the cut of the mill ; 
improvements in our methods of logging and development along other 
lines that has reduced our overhead or general expense. 

When we began sawing in our mill we ran with about 600 boiler 
horse power capacity. We later installed a chemical plant and a wood 
mill for manufacturing chemical wood, which increased our boiler capac- 
ity to over 1600 horse power, and instead of burning our waste refuse 
in a refuse burner we are now using all our refuse for fuel. In our 
woods operation we are paying more attention to pulp wood of various 
kinds, cutting our cedar closer and taking all of the hardwood cord wood 
for the chemical plant so that our logging railroad now has about three 
times the daily tonnage that it did early in our operation. 

I have looked over the cost accounts of the * * * however, 
which go back for more than thirty years. These records show a marked 
decrease in costs, as you go back, and my impression is that about the 
maximum in cost of production was reached in 1908. 

My theory as to lumber values is that the average level of the year 
1913 represents a normal condition in the industry. I do not believe 
that we will get back to the 1913 average this year or next year, and I 
believe that the average level of prices for the next ten years will not 
exceed the level of prices for the past five. This does not mean that 
the individual woods — for instance, Gum and Birch — may not advance 
to a higher level for the reason that they are substitutes for still higher 
priced hardwoods. Maple will advance markedly as the available supply 
diminishes — it is now being sold at less than it is intrinsicly [sic] worth, 
but lumber as a building material, in competition with brick, cement and 
steel, and as a crating and boxing material in competition with fibre, can- 
not look for advanced prices. 

The investigations which you make will bring a great deal of light 
on this subject and I am glad the work is being undertaken. I believe 
that your investigations will bring out this one central fact of the lumber 
industry. During the two decades prior to 1910 the advance in lumber 
values has been greater than the advance in the cost of production and 



APPENDIX 153 



this difference has been absorbed by the stumpage. The advance in 
stumpage value has been sufficient to absorb the reasonable interest on 
the investment in timber and the taxes and other carrying charges. Dur- 
ing the present decade, however, lumber values have been stationary ; 
they have not increased ; they have simply fluctuated with the fluctuating 
prosperity. The result of this is that stumpage values have remained 
stationary also. This is true in Wisconsin and Upper Michigan, and 
while I am not directly familiar with other parts of the country, I be- 
lieve it is more or less true all over the United States, with the exception 
of some specific kinds of wood for which a special market has been 
developed. 

Granting the truth of the above paragraph, you see a very grave 
problem of re-adjustment now confronts the lumber industry. For 
years the lumber operator has been going on cutting timber and manu- 
facturing it into lumber, and making a narrow margin of profit on the 
operation. Year by year the taxes on his timber have been increasing 
and its carrying charges accumulating and the increased value of the 
timber has made good for it. Now — if he must re-cast his figures and 
place the burden of carrying his timber each year on that year's opera- 
tion, the cost of his stumpage cut is doubled. 

Finally — because I have spoken plainly my views of the lumber situ- 
ation you must not conclude that I am pessimistic. I believe that the 
future of the lumber industry is brighter than any other of our great 
industries. We still have an abundance of timber; the uses of lumber 
have not been developed and exploited and advertised as have the uses 
of other commodities ; the manufacture of lumber has never been system- 
atized or standardized as have other industries; we have no recognized 
uniform systems of accounting; no recognized standards of cost of pro- 
duction. It is true that there have [sic] been marked development in 
the mechanical side of the industry, but all of the processes are still waste- 
ful of material and more wasteful of human energy. The trained scien- 
tist is working in his laboratory; the trained forester is working in the 
field ; the expert accountant is getting into the office ; the efficiency engi- 
neer will soon be getting into the mill ; enlightened methods of advertising 
are being adopted by the lumber associations. I even hope that the 
lumber industry will so develop in all these ways as to be able to pro- 
duce and sell lumber at a lower range of prices than in the past. 

Just at the present time the lumber industry, like many others, is in 
the stress of the storm, but the present situation, in its full acuteness, 
is I trust but temporary. 

The letter from which these excerpts have been taken was written 
in November, 1914, by a prominent lumber manufacturer in the Great 
Lakes region. The name of the company is withheld by request. 



